It’s possible, but not inevitable. Some economists are predicting one by the end of 2023, and many variable factors affect the economy outside of our control. Big ones right now include COVID-19 and supply chain disruptions, climate change, the war in Ukraine, and more. Even the experts have uncertainties, and as Alix Martichoux recently wrote for The Hill, “the economy right now is weird.
” Most economists are forecasting some kind of economic slowdown but if it’s a recession, it’s likely to be a “recession with a small r.”
What’s that? It’s a short-term, mild period of economic contraction. It can be uncomfortable, but it doesn’t have the far-reaching or devastating effects of a major Recession like the one in the early 1980s or the late 2000s.
Most experts believe that the strength of the labor market will be a major factor in preventing a severe economic downturn. There have been high-profile layoffs in the tech industry and consumer spending has started to slightly slow but the unemployment rate is very low, job growth has been strong, and there are still more available jobs than there are available workers. The U.S. job market is the strongest it’s been in over 50 years.
Why is this important? Because usually, “Rising unemployment is one of several indicators that define a recession. It also makes the downturn worse” (McGrath, 2022
). That’s why U.S. Bank’s Rob Haworth says that ultimately at this point, it’s the job market that will dictate the economy’s direction. “If [the job market] starts to weaken, it may mean the economy is about to face more headwinds” (Haworth, 9 March 2023