What’s next for the economy? 10 charts that show where things stand.

Economists remain divided on whether a recession is imminent

A trader works on the floor of the New York Stock Exchange. (Michael Nagle/Bloomberg)
6 min

The 2022 economy was a jumble of flip-flopping growth, decades-high inflation and fears that a steep slowdown could plunge the country into recession. (It didn’t.)

But big questions remain, and economists say we’re in for an even more fraught guessing game in 2023.

The Federal Reserve has been aggressively trying to slow the economy enough to cool inflation. That appears to be working so far, but there are concerns that the economy — and especially the job market — could slow too quickly in the coming months, setting off a recession.

Major institutions remain divided on whether a downturn is imminent. Banks offer a range of scenarios — from predicting that the economy “just skirts” a recession (Morgan Stanley) to saying one is “very likely” to begin in the first half of 2023 (Bank of America).

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“I don’t think anyone knows whether we’re going to have a recession or not — and if we do, whether it’s going to be a deep one or not,” Fed Chair Jerome H. Powell said at a news conference last month. “It’s not knowable.”

Here, in 10 charts, is what we do know about the economy today.



Americans are finally beginning to feel relief after months of rapidly rising prices on basics such as food, fuel and rent. Overall inflation has fallen for five straight months and is expected to continue its descent in 2023.

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A number of goods — including bacon, doughnuts and potatoes — have actually gotten cheaper in recent months, as pandemic-related product shortages and transportation tangles have gotten sorted out. Larger expenses such as utilities, health care and airline tickets have also become more affordable.


Gasoline prices

Meanwhile, average gasoline prices, which peaked at about $5 a gallon nationally this summer, have retreated from record highs, thanks in part to a decline in global demand.


Borrowing costs

But the easing of inflation is just one part of the picture. In its effort to combat skyrocketing prices, the Fed has raised interest rates seven times in the past year. Although the central bank controls just one interest rate — the federal funds rate, which banks use to lend money to each other overnight — its actions have an almost immediate impact on all types lending, including mortgages, car loans and credit card rates, all of which are getting costlier.

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Home sales

The run-up in borrowing costs — including a doubling in mortgage rates — has had a chilling effect on the housing market. Home sales have fallen for 11 straight months, and construction of new single-family homes is at its lowest level since May 2020, when much of the country was shut down. There are also signs that rapidly soaring home prices have stabilized in many parts of the country, a trend that economists expect to continue in the coming months.



It isn’t just the housing market that’s in free fall. Americans are spending less on other big-ticket items, too, such as furniture, cars and appliances that were in high demand early in the pandemic. As a result, U.S. manufacturing — considered an early indicator of where the economy is headed — has been on a steadily downward path.


Job market

The job market has for months been a bright spot in the economy. The unemployment rate of 3.7 percent remains near historic lows, and many employers say they’re still desperate to find and keep workers. Importantly, there hasn’t been a meaningful rise in layoffs even as hiring has slowed.

However, economists warn that the labor market is likely to get shakier in 2023, as the Fed’s tightening works its way across the economy. Barclays, for example, expects the unemployment rate to rise to about 5 percent next year, which would translate to more than 1 million job losses.

“We believe that’s what would be needed to bring inflation down,” said Marc Giannoni, the bank’s chief U.S. economist. “We have a very resilient economy and a strong labor market, but we expect things will slow.”


Personal savings

The good news is that most Americans have remained employed — and even gotten raises in the past year. But a lot of those wage gains have been obscured by persistent inflation, which has cut into families’ budgets and made it difficult to keep up with basic expenses like groceries, rent and utilities. As a result, more people are dipping into their savings accounts without replenishing them. The personal savings rate — which rose to an eye-popping 34 percent at the beginning of the pandemic, when many families benefited from government stimulus checks — has fallen dramatically in recent months.


Stock market

It isn’t just personal savings accounts that have taken a hit in the past year. The stock market, which rose to meteoric highs in January, spent the rest of the year on rocky terrain. Highflying tech stocks that soared during the pandemic have seen some of the largest declines in recent months. Shares of Facebook parent company Meta have plunged nearly 70 percent in the past year, while shares of Amazon are down 55 percent. (Amazon founder Jeff Bezos owns The Washington Post.)

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Overall, the S&P 500 index has lost 20 percent of its value from a year ago, wiping out trillions in investments.


Gross domestic product

More broadly, the U.S. economy has rebounded after unexpectedly shrinking in early 2022. An increase in government spending and a narrowing trade gap, with American retailers importing less and exporting more, helped gross domestic product late in the year.

But economists warn that those gains could be short-lived as major chunks of the economy, including housing and consumer spending, continue to moderate.

“The irony is, we’re seeing the strongest growth of the year when things are actually slowing,” Diane Swonk, chief economist at KPMG, said in October, after the third-quarter GDP results. “There are some real cracks in the foundation. Housing is contracting. The consumer is slowing. GDP is growing, but not for all of the right reasons.”


Recession forecasting

So what’s next for the economy? Economists aren’t quite sure. There’s no question that we’re in for more of a cool-down, though it’s unclear how rapidly or dramatically that might happen. The Fed is hoping to slow the economy in a gradual and controlled way, though many experts agree that things could quickly spiral down, possibly leading to a recession. Current forecasts vary considerably, though several major U.S. banks still say it’s possible — if not expected — that the U.S. economy will contract at some point in the new year.

“Our recession probability models have moved to uncomfortably high levels,” Morgan Stanley economists wrote in a recent report. “Tighter financial conditions and market volatility suggest recession in the next 12 months is a coin toss.”