Predictions for 2023. Not an Expert.

What are my qualifications for writing this article??Absolutely none.?Heck, I can’t even tell you that I am normal.?So, here are my predictions on the economy, unemployment, interest rates, inflation, transportation, and gas prices.

Economy

More of the same.?2023 will be filled with uncertainty which will keep consumer confidence on the fence for the entire year.?Housing prices will fall but will still be considerably higher than pre-pandemic levels.?We will narrowly avoid a recession.?Why??Low unemployment.

Unemployment

The balance of power that has shifted to the employee will continue, despite a lack luster economy. ?We will start to see more businesses fail or change their labor model due to their inability to attract, and pay for, workers.?Why??Gig and remote work were already building steam before 2020, but the pandemic made more people shift to “working to live” instead of “living to work”.?This trend is predominately in the Millennial and Gen Z generations, and this is clashing with the Baby Boomer and Gen X ideals.?

Automation will also take a large leap forward in 2023, again, mainly due to the difficulty in finding labor.?Fast food, grocery and mass retail will be driving the trend.

Onshoring (moving manufacturing to the US) will also help to fuel job growth.?Many companies have figured out that having something to sell, even at a lower margin, is better than having nothing to sell. ?The supply chain backlog as well as the COVID restrictions in Asia (mainly China) taught us a valuable lesson.

Interest Rates

The Federal Reserve rarely gets it right, but this time I think they will curtail interest rate hikes by mid 2023. Why??Inflation seems to be slowing and there are even some significant retreats in pricing in some areas.?Unfortunately, given input cost increases and businesses’ reluctance to give back price increases, we won’t see prices hit pre-pandemic levels.

Inflation

See the interest rate paragraph.?Inflation is slowing, and it will continue to soften, but we will not see prices go down much further.?The first quarter will see some significant improvement as retailers right size their inventory after having over bought for the Christmas season.

Housing will continue to take a hit although the price slide will slow by the end of the second quarter because demand will rise, and new home prices won’t be able to drop any further (due to input prices).?The inability to find labor will also help to slow the drop in housing prices, while commodity prices will help offset some of this.

Transportation?

You need to look at transportation in segments, Ocean, Truck Load and Less Than Truckload (TL/LTL), and Small Parcel (UPS, FedEX).?These three are interdependent, but pricing tends to move separately.?

Ocean freight costs have fallen dramatically over the past few months.?I think this has hit a bottom, and ocean freight rates will remain steady throughout 2023. ?In the short term the excess retail inventory will help keep ocean rates lower.?Retailers will have again be able to flow goods in over time.?Long term, onshoring will help to keep demand lower, as we continue to grow our manufacturing of critical and high value goods.

TL/LTL rates have softened in the back half of 2022. This will plateau in Q1 of 2023, then rise slightly and remain flat for the rest of the year.?The main reason is the continued driver shortage.?Driverless trucks will continue to grow in numbers, but the number will be nowhere near the driver shortfall.?This will not cause major supply chain disruptions, but we will see many companies close their doors because they cannot attract nor retain drivers.

Small Parcel will see the most significant rate hikes in years.?This is not a premonition, I read this last week.?I have also heard that FedEX may finally start to combine their delivery fleet (ground and express).?UPS and FedEx normally adjust rates once per year so rates will not change, but, demand is going to continue to grow, albeit a little more modestly this year.?

Gas/Diesel Prices

There will be little movement in gas and diesel in 2023, but this could change very easily.?The US refining industry is dealing with old facilities and accidents happen very frequently.?With the current political climate, there will not be any addition to the refining capacity in the foreseeable future.?This, coupled with the lack of infrastructure to support EVs (especially trucks), we are at risk of sky-rocketing prices if issues arise.

In closing, these are my thoughts based on reading, listening, and experience.?I hope I am lucky enough to be here this time next year to read this and see how wrong I was…Happy New Year!