2023’s Economy Didn’t Play by the Usual Rules

Strikes, federal government funding fights, skyrocketing mortgage rates — it's been a wild ride, but the economy has shown surprising strength.
Anna Helhoski
By Anna Helhoski 
Edited by Rick VanderKnyff

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The U.S. economy was nothing if not weird throughout 2023, but step back and the overall picture is stronger than you might suspect.

From one viewpoint, consumers are still struggling with forces beyond their control: They’re paying more for goods and services compared with the pre-pandemic years; the Federal Reserve continued its rate-hike spree for most of the year; and sky-high mortgage rates put homeownership out of reach for more people.

Despite these financial challenges, the U.S. never fell into a widely expected recession. Far from it, in fact. And banks, including Chase and Goldman Sachs, and the Fed have stopped predicting one — at least for 2024.

That’s because, seen from another angle, the economy is booming: Unemployment hit its lowest point in 50 years; inflation continued to slow down and certain goods and services even deflated; the Fed paused rates multiple times; the nation’s growth surpassed expectations; and consumers are still spending like there’s no tomorrow.

Here’s a deeper look at some of the other ups and downs of the economy this year.

The U.S. narrowly escaped debt default

The U.S. hit its $31.381 trillion debt ceiling on Jan. 19, putting the government at risk of defaulting on its debt. Rather than raise or suspend the debt ceiling so the U.S. could meet its legal obligations, House Republicans wanted to negotiate.

A deeply divided Congress struggled for months to reach a consensus, all while the June X-date — the date when the government would default — loomed closer.

In June, then-House Speaker Kevin McCarthy and President Joe Biden reached a bipartisan agreement — the Fiscal Responsibility Act — to suspend the debt ceiling until Jan. 1, 2025.

President Joe Biden meets with then-House Speaker Kevin McCarthy in the White House on May 22. (Photo by Drew Angerer/Getty Images)

A default could have led to a worldwide financial crisis. But in the end, the close call resulted in U.S. credit changes: a credit rating downgrade by Fitch Ratings and an outlook downgrade by Moody’s.

Bank collapses triggered fear of widespread failures

In March, two banks failed in one weekend: Silicon Valley Bank and Signature Bank. Depositors at both banks withdrew their money simultaneously, resulting in a bank run. The collapses left the federal government scrambling to intervene to alleviate the potential for a contagion of collapse that could have destabilized the entire banking system.

The Federal Deposit Insurance Corp. took over and established bridge banks until other larger banks agreed to buy the loans and deposits of each entity. Meanwhile, the Federal Reserve sought to mitigate market volatility and assuage public perception of the banking system. Biden reiterated to the public that no losses would be borne by taxpayers.

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In a post-mortem report by the Federal Reserve, it admitted to shortcomings and neglect in identifying potential problems at Silicon Valley Bank. The FDIC released an assessment of Signature Bank’s failure that blamed poor management as the primary culprit.

Student debt cancellation got struck down, payments resumed

The Supreme Court blocked Biden’s debt cancellation plan in June, but the White House is pursuing a ‘plan B’ for vulnerable borrowers.

Federal student loan bills came due in October after a three-year pandemic pause. A new income-driven repayment plan called SAVE softened the blow: 5.5 million borrowers have enrolled, including 2.9 million who ended up with $0 payments.

For current and future collegians, a revamped Free Application for Federal Student Aid (FAFSA) is expected to launch by the end of December.

A sign in support of student debt cancellation outside the Supreme Court on Feb. 28. (Photo by Eliza Haverstock/NerdWallet)

Travel exceeded pre-pandemic numbers

Some of the last major COVID border restrictions were lifted in spring, and travelers returned in full force — in some cases, even surpassing pre-pandemic numbers. According to the Transportation Security Administration, the Sunday after Thanksgiving set a record for the busiest day ever at U.S. airports. More than 2.9 million people passed through TSA checkpoints.

Hotels and vacation rentals rebounded, too, in the U.S. and abroad. According to Eurostat, the statistical office of the European Union, the number of nights spent in European tourist accommodations during the first half of 2023 reached its highest level of the past decade. Airbnb also had a record summer travel season in 2023.

But more travelers also meant travel companies were stretched. Delta made it harder to earn elite status in its SkyMiles loyalty program and the airline received so much customer backlash that it rolled back some of those changes. American Airlines cracked down on “skiplagging,” a controversial tactic some travelers use to save money on airfare.

Gas prices went on a roller coaster

Gas prices remained volatile in 2023, falling as low as $3.22 on average and nearly reaching $4 per gallon on average in September, according to the U.S. Energy Information Administration. It was not as wild a ride as 2022, though, and prices never came close to their June 2022 peak of $5.02 per gallon on average — an all-time high.

This year, pump prices have been easing since that September peak, and are now at an 11-month low, according to Reuters. Much of that dip is due to seasonal demand, with fewer drivers on the road in colder winter months. The winter fuel blend sold at the pump is also cheaper than the summer blend, per AAA.

Workers scored contract wins through disruptive strikes

United Auto Workers members and others gather for a rally after marching in the Detroit Labor Day Parade on Sept. 4. (Photo by Bill Pugliano/Getty Images)

Workers across industries tested their power in 2023 and weren’t disappointed. Strikes by screenwriters and actors, auto workers and health care staff, among others, ended with major — sometimes historic — contract wins. Demands centered on better pay and benefits but also touched on the varied ways workers anticipate new technology could impact their livelihoods.

The strikes that made up “hot strike summer,” which stretched into the fall, continue a two-year trend of increased organized labor activity.

Mortgages became more expensive

Mortgage rates trudged skyward for the first 10 months of the year, and home sales stumbled. Inflation, plus the Federal Reserve's efforts to get it under control, pushed mortgage rates to their highest level in almost 23 years at close to 8%.

Higher rates took a toll on home affordability. Existing home sales in 2023 were on track to be about 25% lower than in 2019. If there's a bright spot, it's that mortgage rates dropped in November and were forecasted to slide lower in 2024.

Speaker of the House Mike Johnson departs a House Republican Conference meeting on Nov. 14. (Photo by Anna Rose Layden/Getty Images)

The federal government nearly shut down — twice

In September, Congress failed to approve appropriations to fund federal operations, putting the government on the fast track to a shutdown.

A government shutdown typically leads to suspended services and sends federal workers home without pay. On the precipice of an Oct. 1 shutdown, a Hail Mary continuing resolution extended government funding until Nov. 17.

Soon after, House Republicans ousted McCarthy as speaker and took weeks to find his replacement, Rep. Mike Johnson of Louisiana. Johnson presented a two-step continuing resolution on Nov. 11 and it quickly passed muster with Congress.

The second stopgap splits deadlines in two depending on the department: Jan. 19 and Feb. 2. The resolution keeps funding at 2023 levels. But pushing shutdown drop-dead dates into 2024 means we’re not out of the woods yet.

NerdWallet writers Eliza Haverstock, Holden Lewis, Taryn Phaneuf, Cara Smith contributed to this article.

Photo illustration images via Getty Image and NerdWallet, counterclockwise from top left: Chevron gasoline by Mario Tama/Getty Images News; home for sale by Brandon Bell/Getty Images News; Silicon Valley Bank exterior by Justin Sullivan/Getty Images News; House Speaker Mike Johnson by Drew Angerer/Getty Images News; United Here Local 11 Strike by Mario Tama/Getty Images News; student debt protest outside the Supreme Court by Eliza Haverstock, NerdWallet; Federal Reserve Chair Jerome Powell by Kevin Dietsch/Getty Images News

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