With interest rate hikes following quantitative easing nearing an end, the Chief Economist Outlook regularly paints a picture of nearly two-thirds of global economists believing a global recession is likely in 2023. This provides an interesting space to review what has happened to the economy in 2023.
This year, economists prefer the term “rolling recession” to describe what happened in the United States under the monetary tightening that began last year, rather than a hard or soft landing.
A hard landing refers to an economic downturn in which the economy experiences negative growth, private consumption shrinks sharply, high unemployment, and companies significantly reduce capital investment.
Meanwhile, a soft landing occurs when the slowdown is milder, with private consumption and investment softening but still maintaining the growth rate.
A rolling recession is an intermediate stage between a hard landing and a soft landing. The economy generally does not slow down much, and the impact on industries is selective, with some industries expanding and others contracting. Most importantly, the overall job market has not been significantly negatively affected, although there may not be many jobs created.
Since the U.S. economy has not experienced two consecutive negative GDP growth episodes this year (see Figure 1), which the National Bureau of Economic Research has historically defined as a recession, the term “rolling recession” makes sense.
In addition, inflation appears to be more stable in the second half of the year, with year-on-year growth as low as 3.1% in November 2023, close to the Fed’s 2% target.
In 2023, there is no doubt that U.S. industries including technology, finance, and real estate become among the biggest losers, with significant job layoffs.
From the perspective of expansion, the service industry, especially the consumer services industry, is growing, which shows that the labor market is generally strong this year (see Figure 2).
Jerome Powell hinted that interest rate hikes may be slower in 2024 in response to stabilizing inflation. That has raised concerns about whether a rolling recession could turn into a recession as government intervention decreases and markets become freer.
