By Morf Morford, Tacoma Daily Index

With apologies to Joni Mitchell, who wrote the song Both sides now, that simple phrase seems to capture the essence of the economy we find ourselves in. Depending on who you read, or trust, or even believe, the economy and all of us, are, from our culture to our civilization to our most treasured institutions, either on the precipice of collapse or endless catastrophe or on the verge of a new, unheralded, indescribable era of safety and prosperity. From what I read and hear from a variety of sources, we seem to be going full-speed ahead – in both directions.

When it comes to the traditional benchmarks of an economy in peril, from high debt levels (both corporate and individual) to inverted yield curves and hyperkinetic interest rates, we have plenty – in virtually every region and aspect of our economy. And, when it comes to the traditional benchmarks of an economy poised to expand and consolidate and offer, explore and take advantage of access and opportunity for all, we have plenty of that too.

The stock market is not the economy – or is it?

The stock market may not BE the economy, but it is not entirely independent of it either.

Whether the stock market anticipates, tracks, exaggerates or follows the economy on Main Street or in our personal economies is anyone’s guess, or subject to change or even subject to interpretation. For example, the stock market has surged nearly 30% since its mid-October, 2022 low. And, mostly thanks to the surge of interest and investment in AI (artificial intelligence) we saw the best start in 40 years for the technology-heavy Nasdaq Composite.

Many economists expected 2023 to arrive with a record-breaking recession – and even still, there are many who expect a recession to hit the US economy within the next year. And they said that last year. And the year before. And the year before that.

Someday they’ll be right of course. But there’s something about dire warnings that grow stale over time. But if there’s anything we know about warnings, it is that they tend to be most necessary when they are most neglected.

With record high interest rates, persistent inflation, and even fractures in the banking sector, one might think that our economy is faltering like never before. But the American economy is nothing if not resilient.

Employment

Not only is employment at record highs, employment participation (the percentage of potential workers actually employed) is also at record highs. And it has held steady for four months (as of June 2023). You can see the fine print on US labor force participation here.

We may not know what it means for (or how it will impact) the future, but the unemployment rate near a five-decade low means something.

It has been a long-time truism that a recession is not possible with full (or near full) employment participation. We may, or may not, be an exception to that rule.

Forecasting is difficult, especially about the future

Industrial production, business and consumer confidence, new home sales, and retail sales have all slumped recently. But maybe all those things, that used to matter so much, barely matter now.

Many economists, for example, say that, based on traditional measurements, a downturn should have arrived in late 2022. But for most of us, it didn’t happen.

On the other hand, in the first half of 2023, a strong labor market, solid sales, and a high level of preparation against the worst possible scenarios have shielded us against the extremes of an economy in flux.

Economic currents now are coalescing into the elements of a new economy in the later parts of 2023 and the first half or so of 2024. A combination of declining inflation and rising unemployment set the stage for an economy more promising than we have had on the horizon for many years.

Inflation hits us all. And it hits us everywhere – at home and at work, and everywhere else. The good news (for most of us) is that for 2023 inflation is projected to be closer to 3% after peaking at a paralyzing 9% toward the end of 2022.

When it comes to inflation and economic uncertainty in general, the reigning question is, have we seen the worst, or is the worst yet to come?

The negatives in this economy are strong – financial instability of regional banks, weakening corporate balance sheets, rising rates of business bankruptcies and personal credit card delinquencies are never a good sign. But are they a sign of where we have been or where we are going?

We all know that we can expect continued or increased tighter credit and weakness in the housing market – even in projected construction.

We are building momentum, but in which direction?

Locally I see many empty storefronts – but they don’t stay empty long.

Businesses emerge as quickly as others fade. The past couple of years have been difficult for many of us. New names are on many familiar buildings. It seems like a lot has changed in the past few seasons, and perhaps that is a summary of the coalescing economy – changes and challenges come at a pace we’ve never seen before.

As always, perhaps, the best course of action is vigilance and resourcefulness. The economy holds opportunities and hazards perhaps like never before.

In a sense perhaps, that old adage holds more true and relevant than ever before; what happens to us is not even remotely more powerful and important than how we respond to it.