Op-ed views and opinions expressed are solely those of the author.
The United States’ economy surpassed expectations in 2023, despite fearful predictions from thousands of economists in the latter stages of the previous year.
Government data – which must always be taken with a pinch of salt – suggests real GDP (gross domestic product) grew by 3.3% from Q4 2022 to Q4 2023. Boosts in manufacturing, and higher-than-expected rises in consumer spending, have been attributed to a surprisingly strong 2023.
What Is a Recession?
Definitions of recession vary, particularly as it’s one of those scary words that politicians use to attack their opponents. The National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months”.
The most recent recession, according to the NBER, was in Spring 2020, lasting from February to April at the beginning of the COVID-19 pandemic. Despite the “quite brief” period of economic decline, the drop in economic activity from February that year was so significant that it effectively resembled a recession.
Likely Republican Party presidential nominee Donald Trump has quietly shifted away from predictions of a Great Depression, and has now expressed his wish that any recession takes place before his possible assumption of the presidency in January 2025. If even the outspoken former president is stopping short of highlighting a recession, then perhaps it’s hard to argue that one ever took place in 2023.
That said, as the NBER proved, recessions are open to interpretation.
Factors of Recessions
Recessions are not just titles given to periods of economic activity; they’re a measure of the impact on people who find it harder to pay bills, as well as an indicator on the overall state of the economy.
During a recession, those who are at the bottom of the pay scale are hit harder than those at the top. The same applies during periods of economic growth; American households may be becoming wealthier, but at a disproportionate rate.
Inflation is another factor in assessing how wealthy a population truly is. While 2023 saw a gradual decline in inflation to a yearly average of 4.1%, prices increased year-on-year by as much as 6.4% in January 2023. At the same time, wages only increased by 6.1%. A difference of 0.3% may not be too concerning as a standalone figure, but for almost two years, Americans saw their wages rise less than inflation, thus making them poorer over the long run.
Even though governments release the data, they too are impacted by recessions that aren’t recessions. Debt levels are a key consideration – if they reach unsustainable levels, the short-term growth only masks the long-term economic stability. U.S. debt levels reached $30trillion in 2022, and had risen to $31.4trillion by January of the following year. Worryingly, this figure has exponentially risen across 2023, with debt levels surpassing $34trillion in November.
Even the most sceptical politicians are not claiming the U.S. is in a recession – understandable when the main indicator of economic growth suggests economic prosperity. However, an analysis of all the factors associated with recession implies otherwise.
Ultimately, 2023 became the year we lived through the recession that never was.