Gross Domestic Product

Gross domestic product (GDP), the broadest measure of the nation’s economic health, grew 2.5 percent in ’23, adjusted for inflation. If one excludes the boom years (’04, ’05, ’21) and the bust years (’08, ’09, ’20), GDP growth in ’23 was slightly above the 20-year average (2.4 percent). 

The year finished strong. U.S. real GDP grew 4.9 percent in Q3/23 and 3.3 percent in Q4/23. Early indications suggest growth has accelerated. As this newsletter went to press, the Atlanta Fed estimated that real GDP was growing at a 4.2 percent annual rate. The official estimate of first quarter GDP won’t be released until late April.

Forecasters have grown more upbeat about the nation’s outlook. This time last year, over half the respondents to a National Association for Business Economics survey put the likelihood of a U.S. recession over the next 12 months at better than 50-50. In a January ’24 survey, only nine percent placed the odds of a recession over the next 12 months that high. Likewise, The Wall Street Journal’s January ’24 survey of economic forecasters placed the probability of a recession in the next 12 months at 39 percent. In October ’22, the group placed the likelihood at just over 63 percent. 

Employment

The nation created 2.7 million jobs in ’23, the fifth-best year of the past two decades. Growth slowed in the fall but picked up in December to finish the year strong. Seasonally adjusted, payroll employment stood at 157.2 million as ’23 closed. The U.S. has 4.8 million more jobs now than it did prior to the pandemic.

All but three sectors added jobs in ’23. Inventory destocking and weakness in wholesale trade impacted transportation and warehousing. Firms had less need for con-tract workers thus impacting administrative services. The information sector (i.e., traditional media and telecommunications) continues to lose market share to the internet and social media.

Unemployment

The year ended with a 3.7 percent unemployment rate, marginally above where it began at 3.4 percent. The rate is low by historic standards. Over the past 40 years, there have only been 24 months when the rate was at 3.7 percent or lower.

Though layoffs at the tech companies and several major banks made headlines, most employers held onto their workers in ’23. Initial claims for unemployment benefits ticked up midyear but glided downward in the fall. By the end of the year, the four-week moving average tracked lower than before the pandemic.

The Bureau of Labor Statistics (BLS) estimates there were nearly 8.8 million job openings in the U.S. in late November. That’s 2.4 million above the pre-pandemic average. With unemployment rates near historic lows, there are few workers available and looking for work, another reason for employers to hold onto their employees even if growth slows.

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Note: The geographic area referred to in this publication as “Houston,” "Houston Area” and “Metro Houston” is the nine-county Census designated metropolitan statistical area of Houston-The Woodlands-Sugar Land, TX. The nine counties are: Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery and Waller.