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So, Where is the Recession?

So, Where is the Recession?

August 31, 2023

It feels like I have been reading and hearing about recession calls forever. Last year, many, if not most, economists and market strategists were calling for a shallow recession by the second half of the year, and then by the end of the year. When the end of the year was closing in on their calls, recession predictions were pushed out to the first half of 2023, then the second half. And now? I’m hearing fewer and fewer predictions for this elusive recession we’ve all been waiting for. So, what gives? Where’s the recession?

One of the possible reasons many economists and strategists were so wrong on the timing of the recession was they discounted the health of the U.S. consumer. Yes, we Americans love our toys, but maybe even more so, we love experiencing new things and going on trips! Who doesn’t like a trip down the shore, up the mountains, going out to dinner, or taking a cruise? Don’t get me wrong, a new T.V. is nice, but a good steak with a glass of wine and great company makes for an excellent evening.

During the pandemic, Americans took to their computers and purchased every gadget, washing machine, television, and “athleisure” clothing they possibly could. They bet on cryptocurrencies and NFTs, downloaded Robinhood Trading apps, and watched countless hours of “Tiger King” on Netflix. As the pandemic ended, Americans interests shifted back to dining out and buying plane tickets to stay at hotels in faraway places.

Dr. Edward Yardeni, of Yardeni Research, has been very vocal about the economy experiencing what he refers to as a Rolling Recession, and I tend to agree with him. What he means by the Rolling Recession idea is that instead of many industries experiencing a decline in growth at once, like a conventional recession would, this time only a few industries are experiencing a decline in growth at the same time while others are growing faster than the norm. The higher-growth industries are essentially making up for the slowing industries. Think of how you spent your money over the last few years: in 2020 you may have upgraded your kitchen knives to use with new recipes at home while you were bored watching YouTube, now you may have just eaten at a nice restaurant in town because you’re sick of cooking and watching YouTube.

The fact is that consumer spending makes up almost 70% of the U.S. GDP. Consumer spending includes durable goods like cars and furniture, non-durable goods like clothing and food, and services such as education and healthcare. This has helped our economy become much more resilient contingent on people’s consistent employment and other factors.

The employment situation in the U.S. has been very strong since before the pandemic and only became stronger as the pandemic started to abate. Only recently have the employment statistics started to normalize. The last JOLTS report by the Bureau of Labor Statistics showed that the quit rates have dropped to pre-pandemic levels and job openings have dropped to 8.8 million compared to the 12 million in March of 2022. However, there is another driver that’s also adding to consumer spending other than gainful employment: Baby Boomers.

Yes, Baby Boomers have been retiring in droves for the last several years and will continue to retire in large numbers in the intermediate future.  Baby Boomers generally are very active: they like to travel, go to the gym, dine out, and generally enjoy life. Boomers also have something that the Silent Generation may not have been exposed to as much: 401Ks. According to Vanguard (Knueven & Kim, 2023), the average 401K balance for someone age 65 and up is over $250,000. If you sprinkle that with some pension income, Social Security, maybe a part-time job or consulting income, and low debt, you get a recipe for a high consumer spending demographic.

There are other forces at work also, such as lingering effects from the COVID stimulus payments and higher interest rates earned on money market accounts; however, these forces will be more temporary, while low unemployment and healthy retirement accounts of Baby Boomers will have a much bigger impact on consumer spending in the longer-term.

Since Baby Boomers are retiring in such high numbers (lower than average immigration rates during COVID also didn’t help), it’s creating a labor shortage in the U.S. that may last until the late 2020s to early 2030s when millennials attain peak employment. In the meantime, new technologies will continue to emerge to increase productivity: hello, AI.  

Consumer spending on hotels, airfare, and the like may not continue to grow on its current path, but I think as consumers pull back their spending on fancy vacations, or the rising cost of airfare and hotels slow, attention will shift back to retail goods spending as the normal life cycle on electronics and clothing start taking its toll.

The next couple of years will be tricky for economists to predict. The Federal Reserve will have to balance the interest rates with slowing inflation. They will be afraid to keep rates too high so that they slow the economy into a recession, but at the same time, they can’t drop interest rates too quickly so inflation begins to reaccelerate. It’s extremely difficult to accurately predict a recession and the vast majority get it wrong. However, that won’t stop economists and pundits from trying until eventually we get a recession, and they can pat themselves on the back. After all, even a broken clock is right twice a day.

Ricardo Ferreira

Founding Partner, Portfolio Manager


Knueven, L., & Kim, P. (2023, August 31). Business Insider. Retrieved from Business Insider Website:


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that the strategies promoted will be successful.