Many experts are now saying that the post-pandemic economic peak is now over, making way for an impending crash that will surprise and disappoint Americans.
After receiving over $5 trillion in government stimulus and emergency lending policies, the United States economy jolted out of its 2020 recession and into a time of prosperity. But now that interest rates are no longer at historic lows and inflation is seeming to be an almost insurmountable problem, many expect another recession is in the near future – and it won’t be pretty.
Inflation hit a four-decade high this September, despite the Federal Reserve’s best efforts to halt the crisis. And looking towards the future, the economy is expected to fall short of all previously projected growth estimates. Experts see the worst to come in 2023, when unemployment will rise and the job market will tighten even further. Many companies are in the midst of cutting back on their hiring plans, and while job gains are stronger than in past years, the ratio of open jobs to prospective workers is narrowing.
Lauren Sanfilippo, Director of Bank of America's Chief Investment Office, told Business Insider that this is a "painful process akin to waking up the next morning with a hangover after a long, hard bender."
“The bigger the stimulus, the bigger the hangover,” she said in a statement. “[This is] one of the greatest capital surges and injections into the economy is U.S. history.”
While household balance sheets haven’t yet been impacted significantly by this downturn, total savings are expected to go down at a startling rate once the job market tightening increases. Additionally, day-to-day cash flow is down, as real disposable income per capita is well below pre-pandemic highs.
Americans are saving less these days and dipping into their savings to afford usual household items price gouged by inflation. These weaker savings will likely worsen the impact that a recession has on individual households, and ultimately, gross domestic product.