2023 could be the year of the recession that never happened

Photo: RetailWire
Feb 07, 2023

The economic recession of 2023 will not be televised. That’s because it appears unlikely to happen, despite predictions of its inevitability from economists, bankers, analysts and others.

The National Retail Federation’s chief economist Jack Kleinheinz last week said American consumers continue to spend moderately as they navigate inflation and high interest rates.

“A month into 2023, the economy is facing stiff headwinds and — with the exception of easing inflation — will likely face more challenges before it gets better,” Mr. Kleinhenz said in a statement. “The debate on whether we are in a recession will heighten over the next few months, just like last year. But while households will probably feel recession-like conditions this year, I do not expect that the downturn will be severe enough to become an official recession.”

Last week’s government jobs report showed that the labor market remains strong despite recent high profile layoffs at technology and financial firms. The economy added 517,000 jobs in January, multiple times higher than the 185,000 that economists were expecting. Many economists, including Mark Zandl at Moody’s, expect the January jobs number will be revised downward when it is updated. The national unemployment rate fell to 3.4 percent from 3.5 percent.

Mr. Kleinhenz pointed to moderating sales in November and December as providing a rationale for the Federal Reserve Bank to refrain from big increases in the Prime rate, which could put the brakes on economic activity. “The Personal Consumption Expenditure Index — the Fed’s preferred measure of inflation — eased to five percent in December, its slowest annual pace in over a year. That was down from 5.5 percent in November,” he said.

The Fed increased interest rates by only a quarter of a point at its February meeting after having raised the rate by half a percentage point in December.

The inflation rate remains the wild card in economic forecasts. Consumers have been adjusting their purchases to stretch their available dollars and retailers have been pushing back against price hikes by vendors who fail to make the business case for increases.

The International Monetary Fund expects the global economy to improve as China further relaxes its COVID-19 restrictions and the European and U.S. economies perform better than previously expected, The Washington Post reports.

DISCUSSION QUESTIONS: What factors do you think will have the greatest impact on retail industry performance for the balance of 2023? How do you see the year shaking out from your current vantage point?

Please practice The RetailWire Golden Rule when submitting your comments.
"If wages can catch up with inflation and we get back to some level of stasis, I think any downturn is likely to be short and mild."
"I have a stockbroker friend and neither of us have been able to find real signs that a recession is coming. It has turned into more clickbait."
"This year will have the inflation bump recede, but my gut (so un-analytic of me) tells me that it won’t be a recession worth mentioning."

Join the Discussion!

22 Comments on "2023 could be the year of the recession that never happened"

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Mark Ryski

Consumer confidence and spending will determine how retail performs — like it always has. Despite the negative economic predictions, job growth remains strong and consumers keep spending, and as long as that happens, the economy will continue to run well. That all said, retailers still have many challenges. Inflation is putting pressure on margins and while the consumer is spending, they’re being careful with how they spend their money. Overall I’d say conditions are good and the short-term looks encouraging.

Ananda Chakravarty

Employment. This has been the ongoing trend that has countered the recessionary fears, inflation, uncertainty, war, and everything else. It serves as a great indicator of both consumer and business prosperity. For those who’ve never had the real challenge of scraping by, employment allows for food on the table, a car in your driveway and a roof over your head. People can’t remove essentials unless they truly don’t have the means to pay and that happens when people have no jobs. This year will have the inflation bump recede, but my gut (so un-analytic of me) tells me that it won’t be a recession worth mentioning.

Neil Saunders

There are so many contradicting signs and indicators that it is extremely hard to plot a trajectory. However some things are certain.

  1. There is a definitely slowdown in retail growth that has been occurring since the middle of last year.
  2. Retail sales values are being aided by inflation; underlying volumes in many categories are negative.
  3. Several warning signs are starting to flash in the consumer economy: defaults on debts, personal savings down, credit card debt up.
  4. Retail results are polarizing and the numbers from traditionally weak retailers are slipping, especially on the bottom line.

Given the resilience of the consumer to work through these things, a recession may well be avoided. However there is absolutely no doubt that the year ahead will be pretty challenging for retailers.

Jeff Sward

I don’t have to look very hard to find a range of articles that talk about everything from stock market crashes to a robust jobs environment. It all adds up to a level of uncertainty that lingers when trying to forecast future demand. So I think demand forecasting will remain a challenge for some time to come. Which quickly boils down to pressure on the supply chain to adopt different behaviors and methodologies in order to be more nimble and to be able to course correct on a tighter calendar. I’m talking about the manufacturing level of the supply chain, so that’s a big ask. The apparel industry has figured out how to eliminate a fair chunk of time with digital design, but the manufacturing and distribution cycle remains a challenge.

Lisa Goller

Top factors affecting retail include efficiency through cost cutting and automation, inflation and supply chain integration. Also, the rebound in travel and entertainment will shift more dollars away from retail.

Compared to the gloom of January layoffs, February economic reports are starting to sound more optimistic.

Dave Bruno

External forces like supply chain disruption, the labor market and of course inflation will continue to wield a strong influence over retail performance. Internally, even though I may be accused of having a biased opinion, I truly believe pricing strategies may end up having the biggest impact on performance. Those who can walk that increasingly fine line between revenue, traffic, and margins with their pricing and promotions strategies will be the big winners at the end of the year.

Gary Sankary

It’s all about consumer confidence. During COVID-19, normal economic indicators were turned upside down and not a lot made sense. We have high inflation at the moment and, as predicted, as extraordinary supply chain issues are resolved we’re already seeing it subside. This in turn affects consumer confidence.

If wages can catch up with inflation and we get back to some level of stasis, I think any downturn is likely to be short and mild.

Christine Russo

In my opinion the reason that the recession will not happen is because the definition of a recession should be updated. There needs to be a more nuanced view of all economic factors like inflation, job loss and gain, and sentiment plus data markers. Rolling recessions are probably more likely to continue as the world remains more geopolitically volatile.

Cathy Hotka

When unemployment is at the same level it was in 1969, there isn’t a recession. In addition to that, there are thousands of new infrastructure projects ramping up as a result of recent legislation. It may be fun to claim doom and gloom, but that’s simply not the case.

DeAnn Campbell

This year retailers are dealing with economic slowdown, which is an even tougher challenge than a recession. Although recessions are tough, retailers have a clearer understanding of what to do, and government will often step up to help. With a slowdown it’s hard to juggle tightening resources, yet still keep the foot on the gas for technology investment to keep pace with rapidly evolving industry standards. Customers will still spend, but will make cheaper or alternate choices, forcing retailers to flex their merchandising strategies more than ever. Retail is in for a bumpy ride.

Phil Rubin

I love the Gil Scot Heron reference (“The Revolution Will Not Be Televised”!) and it’s such an appropriate theme here. It sure seemed that much of the “recession” was self-inflicted, not just by the Fed but also by the private sector. And by private sector I mean large tech and other areas that got way ahead of their proverbial skis in terms of valuation and expansion. The softening has been pretty pitch perfect so far, and it’s clear when you consider how the leaders are performing compared to the followers and laggards.

The structural impact of COVID-19 was filled with hype (Don’t Believe the Hype!) and as things have reverted to “normal” there is plenty of strength in the economy, especially in labor markets, which should help the retail industry — even if it means pressure on wages. Strong merchants have taken price increases and as the excesses continue to be wrung out of the markets, including the supply chain, this could easily continue to be a soft landing.

Kevin Graff

I’m no economist. But the one thing I know is the media just LOVES a negative story. They take every opportunity to create fear and uncertainty as it attracts attention more than the good news stories. “Retail apocalypse” anyone?

The best thing that could ever happen to retail is for the media to just go away.

Cathy Hotka


Dick Seesel

For all the talk of a recession — which can create a negative mindset even if the facts don’t back it up — there is not much evidence in the data. GDP is growing modestly, inflation is subsiding, and employment is robust despite layoffs in the tech industry. There is some easing of mortgage rates, which will help the housing and related industries.

All this being said, retailers shouldn’t confuse healthy consumer spending with good sales in their stores. Soft Q4 results suggest that consumers are more focused on experiences (travel and dining) and less interested in “stuff” they can buy. I would plan conservatively — but not in overly cautious “recession mode.”

Mohamed Amer, PhD

The key to the economy is the consumer. The unusual condition of record-low unemployment and added millions of non-farm jobs are making the Federal Reserve’s job of meeting its dual mandate on inflation and unemployment difficult. Interest rates will continue to rise into the summer and are likely to stay there longer than expected. Also, Quantitative Tightening will continue through 2023, further reducing market liquidity. Meanwhile, consumer credit card debt is increasing as more households live paycheck to paycheck.

Growth sectors like technology fill the headlines with headcount reductions. The higher cost of capital is now creating challenges for CFOs and raising the hurdle rates for capital projects. Growth of the U.S. GDP is slowing and is likely to turn negative in Q2.The Federal Reserve is stuck in a rut, and its only policy levers are designed to cool off demand with apparent downstream effects — including that inevitable recession. The business cycle isn’t always about puppies and rainbows.

Bob Phibbs

The bizarre fascination with calling a recession started last spring. When that didn’t show up they said Q4. Now they’re backing away from it but it’s still getting clicks. On the whole, the reality is things are looking really good but that doesn’t make people fearful so they’ll find something else.

Doug Garnett

I fully expect this year to be a “middling” year — neither great nor disastrous. For all the prognostications of apocalypse, the truth in the market isn’t fitting those mythologies.

Gene Detroyer

It is hard to believe there is a recession around the corner when the data keeps improving.

  • 2021 and 2022 were the two strongest years of job growth in history. January 2023 added another half-million jobs.
  • The unemployment rate is at the lowest level in 50 years.
  • Though not keeping up with current inflation, real wages rose more than in decades. Notably, as inflation ebbs, real wages will hold.
  • Manufacturing employment continued to grow, with 750,000 total manufacturing jobs created in the past two years.
  • The labor force grew as participation grew more quickly in this recovery than in past ones, especially for prime-age workers.
Ryan Mathews

The unemployment rate is still too low. I know that sounds like a good thing, but the closer we come to full employment the closer we come to inflation and prolonged inflation could easily trigger a recession. That said, the Fed seems to have been effective in minimizing potential recessionary damage. Let’s wait and see what Congress does with the debt limit. If the Federal government goes into default on its debt, there’s no telling what will happen.

Paula Rosenblum

I have a stockbroker friend and neither of us have been able to find real signs that a recession is coming. It has turned into more clickbait.


The road rules for developing effective strategies are as important as ever in retail. Merchants must navigate new business models and constant industry pressures, doubling down on what they can control and being transparent with customers. Here’s a chance to focus on managing inventory by using merchandising to optimize inventory on display, and demand forecasting by applying behavioral data on site to better forecast style, range, and size of inventory orders.

Oliver Guy

If you define a recession as two consecutive quarters of negative economic growth then while this may not happen technically it does not mean a downturn in terms of size or growth will not have big implications.

The economic cycle is very often driven by confidence (or lack of it) about the future. Confidence that an investment will pay off, confidence that you will retain your job, etc.

Less confidence means individuals may choose not to buy that car, book that holiday or spend money on their home. It also means that households may look to cut back day-to-day spending in order to preserve cash for an emergency.

Combine this with increased energy costs and food price inflation and only six weeks into the year 2023 has the potential to be really bumpy.

"If wages can catch up with inflation and we get back to some level of stasis, I think any downturn is likely to be short and mild."
"I have a stockbroker friend and neither of us have been able to find real signs that a recession is coming. It has turned into more clickbait."
"This year will have the inflation bump recede, but my gut (so un-analytic of me) tells me that it won’t be a recession worth mentioning."

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