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  • Denis Pepin

Biden’s Economic Triumph: How the US Beat the Recession in 2023

Updated: Mar 30

Joe Biden  stands in front of the White House with an eagle on his arm. A flag and a stock market graph are in the sky.
The Eagle Has Landed: A Symbol of America’s Resilience and Prosperity. The image portrays a confident Joe Biden, who has successfully steered the nation out of the recession that plagued the world in 2022. With an eagle as his companion, they represent the strength and freedom of the American spirit. The flag, the White House, and the stock market graph all signify the achievements and values of the country under his guidance. The image conveys a message of optimism and pride, celebrating the economic triumph of the US in 2023.

The year 2023 had many good surprises for the United States. Despite the challenges posed by the pandemic, the global economy, the geopolitical tensions, and the environmental crises, there were also some unexpected developments that defied the predictions of experts and analysts. Here are some of the highlights of the year that was:


The Economy: From Recovery to Resilience

The year started with strong momentum for the US economy, which had recovered from the pandemic-induced recession faster than expected. According to the Bureau of Labor Statistics, the US added 14 million jobs since Biden’s inauguration, bringing the unemployment rate down to 3.7% by December.


However, not everything was rosy. The rapid recovery also fueled inflation, which soared to 6.8% in November 2022, the highest level since 1982. Many experts warned that the economy was overheating and that a recession was inevitable in 2023. They cited the risks of the Federal Reserve tightening its monetary policy too quickly, the uncertainty over the fiscal stimulus package proposed by President Biden, the supply chain disruptions caused by the pandemic and the natural disasters, and the potential spillover effects of the debt crisis in China.


But the doom and gloom scenario did not materialize. Instead, the US economy showed remarkable resilience and adaptability in 2023. The inflation rate cooled down to 3.0% by June, as the supply and demand imbalances eased and the energy prices stabilized. The GDP growth rate picked up to 4.9% in the third quarter, beating the expectations of 3.2%. And the labor market continued to improve, adding 1.9 million jobs in 2023, with the unemployment rate falling to 3.7% by December.


One of the factors that contributed to the economic stability was the decisive and effective federal intervention that took over the failing Silicon Valley Bank (SVB), one of the largest and most influential financial institutions in the country. SVB, which specialized in lending to tech startups and venture capitalists, faced a liquidity crisis in March, when the announcement of its losses on its bond portfolio sparked a panic among its depositors and creditors. The situation threatened to trigger a systemic meltdown of the financial sector, as SVB had interconnections with many other banks, hedge funds, and corporations. The Federal Reserve and the Treasury Department acted swiftly and secured a deal to sell SVB to Bank of America, one of the largest and most stable banks in the country. The deal, which was announced in June, ensured the continuity of SVB’s operations and services, protected the deposits and investments of its customers, and preserved the innovation and dynamism of the tech sector.



The Travel: From Lockdown to Lift-off

The year 2023 also saw the revival of the travel industry, which had been devastated by the pandemic. The number of air passengers — both domestically and worldwide — topped pre-pandemic levels in 2023, thanks to the widespread vaccination, the easing of travel restrictions, and the pent-up demand for leisure and business travel. According to the International Air Transport Association (IATA), the global passenger traffic reached 8.6 billion in 2023, surpassing the previous record of 4.5 billion in 2019. The domestic passenger traffic in the US also recovered to 751 million in 2023, up from 401 million in 2020.


And this holiday season was on track to be the second-highest for travel ever, according to the American Automobile Association (AAA). An estimated 109 million Americans planned to travel for the end-of-year holidays, only slightly lower than the record of 112 million in 2019. The majority of travelers chose to drive, but the number of flyers also increased significantly, as more people felt comfortable and confident to fly again. The airports were busy and crowded, the flights were full and frequent, and the destinations were diverse and exotic.


The Gender Gap: From Disparity to Progress

The year 2023 also marked a milestone for the advancement of women in the US labor market. American women working full time still earned just 84 cents for every $1 men earned, but that was up from 83.7 cents in 2020. Women also surged back into the labor force after the pandemic — and into higher-paying jobs. According to the Bureau of Labor Statistics, the labor force participation rate of women aged 16 and over increased to 58.4% in 2023, up from 55.8% in 2020. Women also gained more representation in the sectors that traditionally paid more, such as finance, technology, engineering, and management.


The progress of women in the labor market was partly driven by the policies and initiatives of the Biden administration, which aimed to address the challenges and barriers faced by women workers. Some of the measures included the expansion of the child tax credit, the provision of paid family and medical leave, the increase of the minimum wage, the investment in child care and education, and the enforcement of equal pay and anti-discrimination laws. The administration also appointed more women to key positions in the government, such as the vice president, the treasury secretary, the defense secretary, and the attorney general.


The Diplomacy: From Rivalry to Cooperation

The year 2023 also witnessed a rare moment of détente between the world’s two biggest powers, the US and China. The relations between the two countries had deteriorated significantly in the past few years, due to the disputes over trade, technology, human rights, security, and the pandemic. The tensions reached a boiling point in October, when a US naval ship sailed near a disputed island in the South China Sea, prompting a strong protest and a warning from China.


But the situation changed in November, when the leaders of the two countries met in San Francisco for their first face-to-face summit since President Biden took office. The meeting, which lasted for three hours, was cordial and constructive, according to the official statements from both sides. The two leaders agreed to establish a new mechanism for dialogue and communication, to avoid misunderstandings and miscalculations. They also agreed to cooperate on some areas of common interest, such as climate change, public health, and nuclear non-proliferation. They did not resolve their differences on the contentious issues, but they agreed to manage them in a respectful and responsible manner.


It was the handshake seen around the world. The summit did not mark a breakthrough or a reset in the US-China relations, but it signaled a possible shift from confrontation to coexistence. The two countries would not be friends, but they looked like colleagues.



Consumers Spend Big in 2023 Holiday Season, Lifting Economy into 2024

The holiday season of 2023 was a merry one for consumers and retailers alike, as spending surpassed pre-pandemic levels and boosted the economy heading into 2024. According to Mastercard, online and in-store spending increased 3.1 percent between Nov. 1 and Dec. 24, showing that shopping held up despite the challenges of inflation, supply chain disruptions, and the omicron variant.


Consumers surveyed by Deloitte planned to spend an average of $1,652, representing a 14% year-over-year increase, though a modest four-year CAGR of 2.5% reflects a normalization of trends. Nearly all consumers (95%) participated in the holiday season, up from 92% in 2022 and 88% in 2021, reflecting a return to pre-pandemic levels. Consumers also prioritized non-gift purchases, such as decorations, furnishings, and apparel, which rose by 25% from last year.


The holiday shopping spree was fueled by a solid job market, steady wage growth, and pent-up demand after two years of uncertainty and restrictions. Consumers also navigated the higher prices and lower availability of some goods by budgeting for fewer gifts, spending more on gift cards, and seeking out deals. Nearly one-third of shoppers’ budget was spent in the last two weeks of November, with 78% actively shopping during that period. Black Friday and Cyber Monday also saw a surge in traffic, as 66% of consumers planned to shop during those days, up from 49% in 2022.


The robust holiday spending was a welcome sign for the economy, which had slowed down in the third quarter of 2023 due to the delta variant and supply chain bottlenecks. The fourth quarter GDP growth is expected to rebound to around 4%, according to the Federal Reserve. The holiday sales also contributed to the overall retail sales, which are estimated to climb more than 3% from 2022.


The outlook for 2024 is also optimistic, as the omicron variant appears to be less severe than previous strains, and the vaccination and booster rates continue to rise. The Fed also signaled that it will raise interest rates gradually and cautiously to combat inflation, which has eased slightly in recent months. Consumer confidence and spending are likely to remain high, as the economy recovers from the pandemic and enters a new phase of growth and stability.



DOW and S&P Hit New Records in December, Capping Off a Strong Year for the US Economy

 

The US stock market finished 2023 with a strong performance, as the DOW Jones Industrial Average and the S&P 500 index hit new record highs in December. The rally was supported by positive economic indicators, easing inflation pressures, and optimism about the pandemic situation.


The DOW, which tracks 30 blue-chip stocks, closed at 37,656.52 on December 27, setting a new record close1. The index rose 0.3% on that day, and 12% since the end of October, lifted by the performance of tech giants such as Apple, Microsoft, Intel, and Salesforce. The DOW also entered a new bull market territory, meaning it rose more than 20% from its previous low in October 2022. Historically, the DOW has gained an average of 172% during the last eight bull markets, though returns varied substantially among its constituents.


The S&P 500, which tracks 500 large-cap US stocks, also reached a new record high of 4,781.58 on December 27, rising 0.1% on that day. The index was just shy of its all-time closing high of 4,782.75, which it reached on January 10, 2022. The S&P 500 gained 26.7% in 2023, outperforming the DOW, which rose 19.8%, and the Nasdaq Composite, which increased 21.4%. The S&P 500 was driven by the strength of the consumer discretionary, communication services, and technology sectors, which accounted for more than half of the index’s gains.


The stock market rally was fueled by a solid economic recovery, as the US GDP grew at an annualized rate of 2.7% in the fourth quarter of 2023, rebounding from a slowdown in the previous quarter due to the delta variant and supply chain bottlenecks. The unemployment rate fell to 3.7% in November, the lowest level since February 2020, before the pandemic hit. Consumer spending, which accounts for about 70% of the US economy, also remained resilient, as holiday sales increased 3.1% between November 1 and December 24.


The stock market also showed resilience amid the inflation concerns, as the consumer price index (CPI) rose 3.1% year-over-year in November, slightly lower than the 3.2% increase in October, which was the highest since 2012 . The core CPI, which excludes food and energy, rose 4% year-over-year in November, down from 4.1% in October. The Federal Reserve, which met on December 14 and 15, kept the interest rate steady at 5.25%-5.5% in December 2023, but indicated 75bps cuts in 2024, starting from March, to ease the inflation pressure . The Fed also announced that it will accelerate the tapering of its bond-buying program, which will end in March 2024, instead of June 2024, as previously planned.


The US economy is projected to slow down in 2024, after a strong recovery in 2023. The GDP growth rate is expected to be around 1.5%, much lower than the previous forecast by the IMF. The stock market may also face some headwinds, as the Federal Reserve is likely to cut interest rates in the second half of 2024, amid moderating inflation and weakening economic activity. The uncertainty over the Fed’s policy, the geopolitical tensions, and the potential new variants of the coronavirus are still valid challenges for the US economy in 2024. Therefore, investors should remain vigilant and diversified, and seek out quality stocks with strong fundamentals and growth prospects. However, they should also be prepared for a possible soft landing or a mild recession in 2024, depending on how the economic situation evolves.



  Conclusion


The year 2023 had many good surprises for the United States. The economy proved to be more resilient and adaptable than expected, the travel industry rebounded from the pandemic slump, the gender gap narrowed in the labor market, the US and China eased their tensions, and the consumer spending soared to new heights.


However, the year 2023 was not without its challenges. Inflation became a significant concern, with rising prices affecting households and businesses alike. The debt levels, both public and private, continued to rise, posing risks to financial stability. Inequality, both in terms of income and wealth, remained a persistent issue, despite the economic recovery.


Moreover, while the gender gap in the labor market narrowed, there was still much work to be done to achieve true equality. The easing of tensions between the US and China was a positive development, but geopolitical risks remained, particularly in regions like the Middle East and Eastern Europe.


In the tech sector, issues around data privacy and cybersecurity became increasingly prominent, with governments and companies alike grappling with how to protect individuals’ rights while also harnessing the benefits of digital innovation.


In conclusion, while 2023 brought many positive developments, it also highlighted the ongoing challenges that we must address to ensure a sustainable and equitable future. As we look ahead to 2024, it is clear that our work is far from over. But with resilience, adaptability, and a commitment to addressing these issues, there is every reason to be optimistic about the future.



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