Will 2023 be a soft landing?

The economy is all over the place. The housing market is a mess. Record-high inflation is eating into people’s buying power, even as consumers keep spending. And, despite all of that, unemployment remains low.

Taken all together, these mixed signals make it hard to decipher the big question over the economy: will there be a soft landing from these inflationary highs? Will the economy lurch into a recession?

Experts are forecasting slower growth and cooling inflation. Below we unpack what the numbers say and how people are making sense of this complicated economic landscape.

1. What’s next? Looking ahead to 2023, experts are forecasting that the global economy will be contending with dueling problems: inflation and slower economic growth. Between geopolitical headwinds and central banks tightening monetary policy many signs point to a tougher economic picture in 2023. We will see what happens.
2. Inflation nation. In the U.S., inflation climbed to a 40-year high in 2022, as unemployment remained low and the job market stayed tight and competitive. As a result, the Federal Reserve ratcheted up interest rates to cool off the economy. The Federal Reserve has rarely curtailed inflation without leading to an uptick in unemployment. It looks like the Fed is set on continuing with this plan into 2023 and projects unemployment to rise slightly. Whether or not the economy enters a full-fledged recession is up in the air. Strom clouds on the horizon?
3. Red hot consumer spending. Still, in the face of sky-high inflation, Americans continue to spend. In 2020 and 2021, stimulus dollars and unspent income padded savings accounts. Now, despite higher rise and dried up savings, consumers keep spending. Will fantasy meet reality?
4. Back to 2020. Consumers aren't necessarily feeling good about the economy. Consumer confidence in the U.S. and China, two key drivers of the world economy, fell back down to where they were in 2020. More pessimism in the air.
5. Clouds on the horizon? Consumers are aware of and feel cautious about both inflation and rising unemployment. Compared to last year, when inflation was the sole worry, more Americans are now concerned that unemployment is going to rise too. Most Americans still expect to see some higher prices next year. Trading one problem for another.

There has been significant turmoil in the economy over the course of 2022. Next year, everyone is considering the possibility that the Fed’s soft landing might have an edge to it. For now, the economic picture looks complicated. Many consumers are bracing for higher prices to continue and for unemployment to rise. We will have to wait and see what happens. But uncertainty for now is the name of the game.