An economic downturn is inevitable in 2023. Thanks to rising inflation and very few pay raises to match it, as well as skyrocketing interest rates and other contributing factors, Americans need to be prepared for the worst in the coming year.
Stimulus Only Goes So Far
The United States government gave around $5 trillion in stimulus checks to help Americans in the thick of the pandemic. And as a result of the pandemic, lending programs with low-interest rates were created to further assist Americans.
The economy was seemingly moving in a forward direction again. The world began to open up, and it seemed like the economy was recovering fully. It was obviously too soon for celebration, though, because soon after, things seemed to be settling, inflation rates began to skyrocket, and the economy started back into a downward spiral.
Americans have been left wondering how bad the economy will get in the future and how they will be affected by it long term.
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Making Ends Meet
Many Americans are still struggling to pay for basic needs like rent and food, and with rising interest rates, anyone without a fixed mortgage is suffering from increasing monthly payments.
With inflation seeping into every industry, most notably food and gas, the future of the economy is looking bleak, and many are not sure they are prepared for what is ahead.
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No More Pay Raises
Employers are also having to prepare for the potential consequences of an economic downturn. Many companies are already slowing or have completely halted the hiring process. The labor market did peak at one point, which benefited everyone, as people’s incomes were able to counteract the effects of inflation.
With the inevitable economic downturn, companies have stopped increasing pay at such significant rates in order to prepare themselves for the coming crisis.
Bye Bye Savings
Many Americans were able to bolster their savings during the pandemic. With no travel plans or any need to drive anywhere, money that may have been put towards vacation or gas was able to be redirected into savings. Unfortunately, many of those savings accounts have dried up as people’s incomes can no longer compete with rising inflation rates.
Despite the high rates, however, American spending has remained healthy, with many people living on their savings and giving up their safety nets. These spending habits could put Americans in an even worse spot when the downturn inevitably hits.
An Underperforming Economy
The economy failed to meet the protections that economists set for 2022, making an economic downturn a sure thing. Experts are projecting even higher interest rates going into the holidays and new year as well as an even more aggressive increase in inflation.
2023 will be a tough year for Americans, and everyone should begin preparing for this economic downturn because everyone will feel the effects when it hits.
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This article was produced and syndicated by Wealth of Geeks.
As a certified credit counselor, Max Marvelous has coached over 250 Millennials to help take the stress out of money. When Max is not coaching, you’ll find him reading financial books, indoor cycling, or visiting local pawn shops looking for swiss-made watches.
