How the U.S. Has Defied Recession Predictions & What Lies Ahead

The U.S. has been nearing a recession since 2022. Last year, economists believed that the country would be in the midst of a recession mid to last quarter, but since then, the odds have been in the economy's favor. 

There are many factors that contribute to the U.S.'s ability to prevent a recession from solidifying, but does that mean the country is completely out of the clear? 

In March 2022, the Federal Reserve increased interest rates by +25bps (0.25% to 0.5%). This was the catalyst for many economists' recession predictions, stating that if interest rates continued to increase over the coming months, a recession was surely on the horizon. The Federal Reserve hikes interest rates in order to bring balance to the economy and reduce prices for goods and services across the board. 

Since COVID, price increases are now a norm. Across every industry, price increases have taken a toll on every city and state, creating a financial burden for many Americans. A rise in interest rates suggests that Americans will be less likely to take out loans, causing the economy to temporarily slow down while also causing corporations and industries to lower prices. 

In some areas of the country,

 by as much as 30%. Automobile prices have increased by almost 5% this year alone. These increases are not sustainable long-term and are likely to contribute to a fall in economic growth, but economists thought this recession would have happened by now. What's the reason it hasn't?

In a recession, the automobile market tends to slow down as people aren't able to afford new loans due to interest rate increases. Essentially, manufacturing companies lower prices, and once interest rates are lowered, the market begins to slowly but surely flourish again. 

Due to a halt in production due to the pandemic, cars weren't as readily available in recent years as they normally are, and as product has ramped up again, the market continues to flourish to make up for lost time. This increase is not likely to be sustainable, especially as interest rates continue to rise, but until then, it's likely to contribute to the yielding recession. 

During a recession, unemployment rates tend to skyrocket. This is due to companies looking to combat the slowing demand for services, leaving them unable to employ as many individuals as prior. The unemployment rate is an excellent indicator to determine whether or not we're in a recession, and as of right now, we're still in the clear. 

The unemployment rate hovers at 3.8% and has been stable over the past year. A rate between 3-5% is ideal and considered to be in good standing, but that's not to say that it couldn't increase in the last quarter of 2023 or into the first two quarters of 2024. 

Many industries are experiencing major layoffs, most notably the tech industry. There are over 

 tech companies in the U.S. Due to inflation, these companies have been laying off hundreds of thousands of workers to combat the increase in goods and services costs. But that alone hasn't obliterated the unemployment rate just yet. 

Talks about stimulus checks haven't been in the media for many months. However, this financial boost still plays a role in preventing the economy from being in an early recession. The stimulus checks were issued at a time when unemployment rates in the U.S. were at an all-time high due to the pandemic. 

During this time, financial relief was also provided for many Americans, and while the stimulus checks were necessary to help support the economy, some Americans had the luxury of being able to save it rather than spend it immediately on essentials. Stimulus spending has still helped boost the economy in the midst of inflation today, but there's no telling how long this support will be relevant. 

Another factor that may be contributing to a delayed recession is the rise in self-employment. During the pandemic, many Americans were out of work. In some cases, these months caused citizens to get creative in their approach to creating revenue. Self-employment has slowly risen since the pandemic and continues to see an increase in popularity today. 

 have enabled users to sell services and goods more quickly and efficiently than ever before, allowing individuals to have stronger ownership over their finances. Even with the rise in self-employment rates, if interest rates continue to increase, this will likely offset an individual's ability to be self-employed as the demand for goods and services decreases. 

Over the past few months, inflation has fallen from 9% to 3%. This is an excellent sign for the American economy, although not enough as of yet to surely say a recession isn't imminent. The subtle decrease in inflation has likely relieved some of the financial burden many Americans and corporations have felt. 

Even with the inflation relief, it's hard to say whether this trend will continue or if the rate will increase once again. Part of the reason inflation hit the U.S. so dramatically is due to production and demand issues from external countries. As a country, we can do everything in our power to support ourselves, but with many products and services imported, there's little to nothing we can do to ensure we receive those services at a fair price. This is why it's unlikely that all prices will return to a more affordable or 'normal' state because many parts of the world are still recovering from shortages due to the pandemic. 

It's likely that the Federal Reserve will continue to increase interest rates, and a recession is still expected in the months to come. When will this happen? It's unsure, but once the economy balances out over the next year, we'll have a better understanding of where the U.S. economy stands as a whole.