Grand Canyon Times

President Joe Biden said in a tweet that he believes 2023 will be a "great year," because parts of the Inflation Reduction Act are going into effect. However, the high rate of inflation over the last year resulted in trillions of dollars in lost wealth for American households, and many are struggling to keep up with rising costs of living. Some economists are predicting a nationwide recession in 2023, and a report from the University of Arizona's Eller College of Management predicts that the state will see an increased unemployment rate, decreased personal wealth and high mortgage rates.

"I think it’s going to be a great year. Why? Because we get to start implementing a lot of the things we passed last year. ...You'll see tons of good-paying manufacturing and construction jobs open up. We’re just getting started. Here’s to 2023, and the work we’re going to do together," Biden wrote in a Dec. 31 Twitter post.

Richard Wolff, an economist and professor emeritus of the University of Massachusetts Amherst, said in response to Biden's tweet, "2022 inflation hurt all but richest, + rising interest rates. U.S. stock markets lost 20%...Yet Biden celebrates his gov't gave U.S. a 'great year.'"

The U.S. Bureau of Labor Statistics issued the latest Consumer Price Index (CPI) summary on Dec. 13, which found that the rate of inflation over the last 12 months stood at 7.1%. Over the last year, the cost of food increased by 10.6%, the cost of energy increased by 13.1%, the cost of fuel oil rose by 65.7%, the cost of new vehicles rose by 7.2%, the cost of shelter increased by 7.1% and the cost of transportation services increased by 14.2%.

Inflation hit a record high of 9.1% in June, representing the largest 12-month inflation rate the country has seen since 1981, but wage growth failed to keep up with inflation, CNBC reported. While some Americans did see wage increases last year, wage growth was proportional to an inflation rate of approximately 4.5%. Two-thirds of American employees said their income has not kept up with higher costs of rent, groceries and gas.

A report from the University of Arizona's Eller College of Management predicts that the state will see a "significant" economic slowdown this year, especially in some areas such as the Phoenix Metropolitan Area, which have seen higher inflation rates than the nationwide average. Housing affordability for a middle-income family in Phoenix decreased from 64.9% at the end of 2019 to 22.5% in the third quarter of last year. Wage growth in 2022 was approximately 5.5% in the Phoenix area, a rate that "was well below Phoenix inflation." The report predicts slowed job growth through the state, dropping from 3.8% in 2022 to 1.1% in 2023, which will correspond with a higher unemployment rate. The report predicts that Arizonans will see a decline in real income growth, decreased real estate and stock values, higher mortgage rates and lower housing affordability this year.

A December report from Fed Smith found that during the first three quarters of 2022, Americans' wealth in investments, bank accounts and property values decreased by approximately $6.8 trillion.

Vox reported that many economists predict that the U.S. will experience a recession in 2023, with a weakened labor market and slowed economic growth, although opinions differ on how severe the recession could be. Many Americans, especially those in lower-income households, have dipped into their savings to keep up with the skyrocketing costs of food and rent. 

"Our view is that employment growth will continue to slow and eventually there will be outright job losses. That will have a material impact on consumer spending, and that’ll be a big part of why we fall into recession. It’s really been the labor market and the consumer that has kept the economy buoyant, but once that turns, then the overall economy will as well,” Nationwide's chief economist Kathy Bostjancic said. 

Bostjancic also said that it's "possible" that "inflation proves to be even more stubborn and elevated than expected," which could lead the Fed to raise interest rates even more, which could result in a major recession. RSM's chief economist Joe Brusuelas said an event such as a major supply chain disruption due to China's zero-COVID policy or increased strain on the global oil supply could trigger a more severe global recession.