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For our wallets and for the U.S. economy, 2023 was in many ways the year when life began to look more like it did before the pandemic.
America’s shopping spree slowed and credit card debt rose slightly, while the job market continued to hum and unemployment remained near historic lows. Prices continued to rise, but at a slower pace, and by the end of the year, wage growth was outpacing inflation.
How does it all add up? Here are some of the ways our lives have become both more and cheaper in 2023.
Supermarket sticker shock has lessened this year, and prices at some grocery stores are even going down! Last year’s sky-high costs of eggs (because of bird flu) and butter (because of falling milk production) have finally come down. The same goes for coffee and sugar costs. Let them eat cake! (Or at least scrambled eggs.) Frozen orange juice remains expensive, due to low production in Florida and Brazil. But overall, food prices in November increased slightly by 1.7% compared to last year. The previous year, food prices had risen 12%.
Housing costs have continued to rise this year, but the worst may be behind us. Mortgage rates, which approached 8% in the fall, have fallen on average to 6.67% in recent weeks. The average sales price of a home in November was up 4% from last year. Outstanding credit card debt has rebounded this year, surpassing $1 trillion after falling at the start of the pandemic. But hey, at least our savings rate is also climbing from very low levels! And to address this rising price of auto insurance: It turns out that premiums are fueled by riskier drivers, natural disasters and more expensive auto parts.
Travel and entertainment
It’s time to fly! Falling gasoline prices have been a major factor in cooling inflation, and falling jet fuel prices have also helped drive down airline ticket prices. Dining out is still more expensive due to the higher cost of food and wages – but we still eat out a ton. Spending at restaurants and bars jumped 11.3% in November from a year ago, more than double the increase in menu prices.
This was the year that higher wages finally caught up to and slightly outpaced inflation. It was also a year of big strikes and big victories for established unions – even as nascent unions still fight for recognition against giants like Amazon and Starbucks. The labor market has shrugged off the problems associated with high inflation and rising interest rates. Millions of people have joined or re-entered the job market this year, but the unemployment rate remains very low, at 3.7%. It’s still early, but ChatGPT hasn’t taken our jobs yet.
While many forecasters expected that rising interest rates would tip the U.S. economy into recession this year, we appear to have dodged that bullet. GDP grew at a relatively robust 2.9% rate in the 12 months ending in September, and it appears on track to continue growing as shoppers spend during the holidays. Inflation remains above the 2% target set by the Federal Reserve. But Fed officials have indicated they are likely finished raising interest rates and may be ready to start cutting them in the coming year. The prospect of lower borrowing costs has encouraged investors, pushing the stock market to near record highs.
Calculations are based on the most recent data. Most compared November 2023 to November 2022. Records for credit card debt, student debt and unfair labor practices are from September, compared to a year earlier. S&P 500 and dollar data are as of December 26. compared to a year earlier. Dollar value is measured against a basket of currencies using the U.S. Dollar Index.
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