So far, those who predicted a recession in the US economy in 2023 were all wrong.

Despite predictions, the US economy has not yet entered a recession in 2023.

Author: Andy Serwer, Editor-in-Chief, Yahoo Finance

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Buffett’s famous line remains true: never bet against America.

In a few years, or even a few months, despondent economists may come up with numerous reasons why the US economy did not fall into a recession in 2023.

Predicting that the US economy will fall into a recession in 2023 is perhaps the most widely predicted economic event in modern history, but it can be said with certainty that the US will not experience an economic recession this year.

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Reasons for this include: the storefronts of large and small businesses throughout the US are plastered with help wanted signs, friends who run businesses tell me they can’t find people to hire; the Transportation Security Administration (TSA) data shows that about 2.5 million airline passengers pass through US airport checkpoints each day; hotel prices in most major US cities have risen by more than 10% since before the pandemic; the US stock market has risen 14% so far this year.

People say that the “black swan” is coming, but in fact, it is a “white swan” that is coming. White is the color of most swans, which means that in most cases, the economy will grow and the stock market will rise. Moreover, Warren Buffett’s famous line remains true: never bet against America. With optimism so scarce, noted market commentator Zachary Karabell even produced a podcast called “What Could Go Right?”.

With one week left in the year, is it too early to say that the US will not experience an economic recession in 2023? Perhaps it is a little early, and if the “white swan” is attacked by some foreign bird, the US economy may suffer serious damage, but will the US economy slip into recession in the next 130-plus working days? I don’t think so.

Dr. Martin Luther King Jr. once said that while the arc of the moral universe is long, it bends toward justice. We could also say that while the arc of the economic universe is long, it bends toward growth. There are definitely some direct reasons why the US economy continues to grow, and the fact is that there are many reasons for this.

Top Wall Street economists’ general predictions for US economic growth in the second quarter have risen from negative growth in early April to 1%, with the Atlanta Federal Reserve Bank’s GDPNow tool hovering around 2%. While the expected economic growth rate is not high, the economy is heading in the right direction.

In June, the University of Michigan’s Consumer Confidence Index rose by 8%, and the survey report stated, “The Consumer Confidence Index hit its highest level in four months, reflecting increased optimism among consumers as inflation cools.”

After the largest increase in Social Security benefits since 1981, spending by elderly American consumers is rapidly increasing. Although consumers’ overall spending is selective – they spend most of their money on restaurants, food, and travel, and not so much on cars and jewelry – we can see a cautious, “golden girl” type of consumer mindset, rather than a bubble-style splurge, which is a positive phenomenon. (As for the wealthy people who stock up on goods at dollar stores, guess how they got into this situation?)

However, from a long-term perspective, the most positive fact is the three underestimated bills involving $2 trillion in funds enacted by the United States: the Infrastructure Investment and Jobs Act, the Creating Helpful Incentives to Produce Semiconductors and Science Act (CHIPS), and the Inflation Reduction Act.

Although Kevin Pollari, the person in charge of infrastructure and capital projects for states and local governments at Deloitte, warns that some of the funds involved in these three bills require incremental funding support, he remains very optimistic about these spending plans. Pollari said, “The impact of these funds on the industry and industry is enormous, and the momentum it creates is huge. It has spawned a lot of economic activity, which is really incredible. After meeting with city planning organizations across the United States, I learned that the number of projects is really, really amazing.”

The Brookings Institution calls it the “beginning of the ten-year US infrastructure,” and Joe Quinlan, chief investment officer of Bank of America, said, “The United States is in the early stages of a super cycle in manufacturing.” Quinlan mentioned investments in renewable energy, electric vehicles and battery/charging stations, semiconductors, ports, highways, grids, and airports. He expects annual spending on US manufacturing construction to soar to nearly $200 billion this year, four times the level of ten years ago.

Foreign companies have taken notice. Kunlan pointed out that foreign direct investment in the United States has grown significantly, from $150 billion in 2020 to over $350 billion this year, and is still growing, twice that of China’s foreign direct investment.

“For foreign companies, if you want a share of the pie, you have to come to the United States. It reminds me of the 1970s when Japanese cars and appliances were exported to the United States in large quantities. Later, the United States imposed export restrictions on Japanese cars, and then the Japanese jumped over this barrier and began producing cars in Ohio, Marietta (Honda opened a factory there in 1982) and other parts of the United States. Now it’s somewhat similar,” said Kunlan.

Currently, a Belgian-French joint venture is planning to build a synthetic natural gas facility in Texas; Britons are also preparing to come to the United States, including Johnson Matthey, a British corporate group, and renewable energy company Drax. Drax’s CEO said in an interview with the British Times: “Whether or when we become a majority-owned company in the United States may be worth considering.”

The flow of capital and companies to the United States has caused concern among legislative bodies in the United Kingdom and the European Union, which is a big positive for the United States and has produced a multiplier effect that has been Washington’s intention all along.

All of this unexpected growth has economists perplexed. Kunlan’s colleague, Michael Gapen, chief U.S. economist at Bank of America, recently adjusted his forecast for the U.S. economy, previously predicting that the economy would enter a recession in the second half of 2023 (with the severity of the recession expected to be only half that of a typical economic contraction), now predicting a more moderate slowdown in the first half of 2024, which Gapen even calls a “growth recession.”

Perhaps we can also use a paradoxical rhetoric to predict a “shrinking expansion” of the U.S. economy in 2025.

The author of this article is a columnist for Up and Down Wall Street in Barron’s.

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