At the beginning of 2023, companies face a multitude of economic challenges: the threat of recession, the lack of workers, overregulation, geopolitical uncertainty. The economic indicators and data visualization below reflect this, giving a mixed picture of our economy.
While American companies are currently strong and optimistic, there are fears that the state of the economy is weak – and confidence in the government to do what it can to help is low.
The US Chamber’s 2023 State of American Business event on January 12, 2023 will highlight the role of business-led innovation and the role of government in advancing smart policies to chart a safer and stronger economic future for our nation.
American business in numbers
The State of American Business Data Center analyzes 12 economic indicators around workers, IPOs, consumers, supply chains, energy and innovation to diagnose the health of American businesses and the economy. Jump to each section below for more data analysis and visualizations.
Shortage of workers: 10.5 million unfilled jobs
The pandemic has caused major changes in the American labor market. The US is facing a labor shortage caused by declining legal immigration, early retirement and other barriers that keep workers out of the workforce, such as access to childcare.
Vacancies in USA
Unemployed workers in the US
The Chamber’s Labor Shortage Index indicates the number of vacant workers for each job position. The current Labor Shortage Index reading is 0.73, not far from the low of 0.63 in March 2022. This means that for every 100 jobs, there are only 73 vacancies.
Although job growth was strong this year, the country is moving forward the wrong direction for labor force participation. If the percentage of people participating in the labor force had been the same as in February 2020, we would have almost 3 million more people in the labor force today.
Point: The government can help by taking steps to increase legal immigration while securing the border, improving access to childcare, encouraging work and funding training programs that lead to good jobs. The Chamber’s America Works Initiative policy priorities detail these solutions.
The IPO market, the loan market is declining
Businesses need capital to start a business, run it efficiently and grow. Business growth is stronger when capital is more available. The issuance of initial public offerings (IPOs) is an indicator of the vitality of the economy. More companies go public when growth prospects are strong and they need access to the deep pool of capital that allows them to go public.
The private sector is playing a leading role in driving innovation to solve problems, but the number of IPOs coming to market has fallen below average. Higher taxes, inflationary spending, government overreach, and overregulation are preventing the innovation our economy needs.
Although the number of IPOs was below average in 2022, the number of IPOs issued and the dollar value of IPOs have increased over the past few years. The increase in 2021 was largely due to the growth of special purpose acquisition companies (SPAC). Before the rise of SPACs, there was little growth in the number of IPOs.
The dollar value of IPOs has shown strong growth in several years, implying that larger companies have gone public after spending several years in private ownership. More traditional IPOs (not through SPACs), where younger companies raise the capital they need to grow from an offering, would make the economy more vibrant and dynamic.
Point: Smart government policy will help the economy by encouraging, not disincentivizing, companies to go public and stay public.
For smaller businesses, commercial and industrial (C&I) loans are their primary source of vital capital for growth and advancement. The value of C&I loans issued was high.
Point: As the Federal Reserve continues to tighten monetary policy to fight inflation, C&I loans will shrink, making it harder for many companies to access financing.
Strong consumer spending
Companies exist to serve their customers. The more customers they have and the more those customers spend, the better for business. Consumers have continued to spend despite the turbulent economic conditions of the past few years. The remarkable resilience of the American consumer has been one of the main economic stories since the outbreak of COVID-19.
Although inflation is near the highest levels in 40 years, consumption has increased even more. For example, retail sales — spending at retail stores, bars and restaurants — rose a surprising 1.3% in October 2022, outpacing inflation. Prices rose 0.4% in October, so inflation-adjusted retail sales rose a solid 0.9%.
Point: Savings generated during the period of closure due to COVID-19 are helping users to keep pace with inflation, but this cannot last indefinitely and is a trend to watch in 2023.
The strain on the supply chain is finally easing
American companies are connected through a global network of interconnected supply chains and rely on them to access national and international consumers and compete in the global marketplace.
An efficient supply chain is critical to business growth. The New York Federal Reserve is monitoring pressure on the global supply chain. Higher levels indicate a higher system load.
The pressure on the global supply chain was stable for years before COVID-19. It rose sharply during the pandemic and remains elevated compared to pre-pandemic levels, although it has fallen significantly in recent months.
Point: A well-functioning supply chain is a key component to reducing inflation.
Energy prices are falling
Energy is a huge input cost for businesses. When energy prices rise, companies either have to absorb those costs and see their profits fall, or pass them on to customers with higher prices.
Energy prices, as indicated by the price of oil, were largely stable in the years before COVID-19. They fell while much of the global economy was shut down in response to the pandemic, then rose to record highs when global economies reopened.
1/2Crude oil prices
2/2Natural gas prices
Currently, Russia’s invasion of Ukraine is also causing oil prices to remain high, although prices have fallen slightly in recent months.
Point: American energy production brings economic benefits to American families and businesses and diminishes the economic power of aggressors like Russia. The most important thing Washington can do this year is send long-term signals to energy producers to give them the confidence and certainty they need to invest.
Uneven innovation ecosystem
For the economy to continue to grow, it must have innovation. Existing companies need to create new products and improve existing ones. New businesses are needed to bring fresh ideas to the market.
US granted patents in 2011
USA granted patents in 2020
The number of patents issued is a measure of how much innovation occurs in an economy over time – and the US continues to churn out a large number of patents.
COVID-19 reduced the number of patents issued in the US, but only slightly. Although the number of patents issued is high, less than half go to US residents.
Overall, the US is still a major place for innovation globally. But we need more innovation from US residents, and we need to make it easier and more attractive for innovators from other countries to bring their ideas here.
Chinese innovators file roughly two-thirds of all patents. The US and Japan have almost all other applications. Countries with more patents will see more dynamism in their economies.
American Chamber International IP Index assesses intellectual property (IP) rights in 55 global economies across 50 unique indicators — from patent and copyright policies to international treaty ratification.
The US had the highest score of 95.48 out of 100, indicating a strong IP framework; but the global average remains below 60, showing that there is still considerable room to improve the framework for innovation and creativity in global markets.
New business formations encourage innovation
Like patents, new companies are future generators of economic growth. The more startups, the better, because a large number of startups increases the potential pool of future high-performing businesses.
The years 2020 and 2021 saw the largest increase in new business applications in recorded history. Before the pandemic, the number of requests submitted per month to start a new business averaged just under 300,000. In 2021, there were an average of 450,000, according to data from the US Census Bureau.
Nearly 5.4 million applications were filed to start new businesses in 2021 — the most for any year on record since 2005.
Total number of new business applications in 2019
The total number of new business applications in 2021
The US Census Bureau tracks monthly the number of new business formations projected over the next four quarters. The data below also shows an increase in new businesses created during the pandemic.
New business formations were stable before COVID-19, but at the beginning of the pandemic, new business formations have skyrocketed.
Point: It could be a departure from the pandemic, or it could signal a shift toward a renewed entrepreneurial spirit. This is an indicator to watch in the next year to be safe.
The above indicators help measure the health of the business and the economy – like going to the doctor and being reminded about your cholesterol level or heart rate. While businesses are mostly on solid footing, economic data led the way economists predict mild but short recession in 2023
At this time, companies must remain optimistic and rely on the things that the American business community does so well — the ability to compete and succeed in our free enterprise system, the drive to innovate, determination when you go through tough times, and the opportunity to improve communities and society.
Despite the fragile economy, American companies will continue to work to do the things that society needs, expects and trusts them to do.
The state of the small economy
Our quarterly Small Business Index with MetLife captures the current sentiment among small business owners, their outlook on the economy and the biggest challenges they face.
About the authors
Chief Economist, US Chamber of Commerce
Curtis Dubay is Chief Economist, Economic Policy Division at the US Chamber of Commerce. He leads the Chamber’s research on the US and global economy.
Graphic Designer, US Chamber of Commerce