Recessions occur when personal consumption spending, representing about two-thirds of GDP, weakens materially. The resiliency of personal consumption is directly related to jobs, not rates or inflation. Inflation can mean one does not get quite as much for one’s money, but spending continues. Credit card rates are considerably higher and set differently than the Fed’s policy rates, so Fed rate increases do not hit consumption directly. But, if one loses one’s job, one likely spends less. If one witnesses colleagues lose their jobs, one may cut back on spending. If extended family members lose their jobs, spending may be reduced.

What is happening as we enter 2023 is that sectors that benefitted in the pandemic often hired aggressively to take advantage of the situation (e.g  technology, social media, Wall Street). Indeed, these sectors hired more people than the number of jobs that were lost; and now as the economy rebounds, these same sectors are losing their advantages and having to lay off some workers. By contrast, in the leisure and hospitality sectors, hiring has not yet caught up with pre-pandemic levels. The ebb and flow of jobs lost in some sectors and jobs gained in others is not an indicator of a recession.