Instead, the Houston plastic surgeon’s business is booming. Cosmetic procedures have doubled from pre-covid levels and are expected to grow another 15 percent this year. He’s raised prices, hired another surgeon and, still, is booked through the fall.
“All parties come to an end, but this one just keeps going,” Basu said. “We anticipated things would cool this year — people are dealing with inflation, they’re worried about recession and economic volatility. But I am happy to report I was incorrect: Demand just keeps growing.”
It’s no secret the United States appears to have sidestepped economists’ worst fears of a recession. Many business owners began this year bracing for the worst — expecting to slash budgets and lay off employees. That fear was particularly acute for those, like Basu, in corners of the economy that specialize in nice-to-have luxuries that are often the first to get cut when times get tough.
But now the summer of 2023 is shaping up to be a period of unexpected expansion. With unemployment near 50-year lows, inflation edging down and wages rising faster than prices, businesses and families are still spending: Orders for American-made goods spiked in June and fresh data this week shows that retail and restaurant sales climbed for the fourth straight month in July. The Atlanta Fed is now predicting economic growth will top 4 percent this quarter.
Ducatis and BMW motorcycles are flying off lots. Cruise bookings are at all-time highs. And crowds are spending billions to see Taylor Swift, Beyoncé and “Barbie.” In all, Americans spent more at restaurants, bars, clothing shops and hardware stores in July than they did the month before, according to federal data.
“We’ve had three years of unusual and puzzling moments and frankly, this summer is just one more,” said Claudia Sahm, founder of Sahm Consulting and a former Federal Reserve economist. “People have been talking about a recession for two years — wishing on it, even — but the economy is still strong. Inflation is coming down, unemployment is staying low. Things are not cratering.”
Business owners around the country say demand remains brisk. Despite earlier precautions, such as cutbacks in marketing or delayed investments, many say they’ve been pleasantly surprised that people are continuing to spend. Instead of axing workers, some are hiring more or offering overtime, just to keep up.
In Coeur d’Alene, Idaho, Kelicia and Ken Thompson recently bought a second van to keep up with demand for pet haircuts, nail trims and sugar-scrub facials. Their mobile grooming service for cats and dogs has 120 recurring clients, plus a wait list that has ballooned from a dozen people to more than 45 in a matter of months.
“It’s gotten to a point where we have to tell people, ‘We’re so busy that I have no idea when we’ll be able to get you on our schedule,’” Kelicia said. “If we did have any worries about this year, they’ve been erased very quickly.”
As the good news piles up, economists and forecasters are revising their recession calls — pushing their projections for a downturn further into the future or scrapping them altogether. Fed staff, who had worried about a “mild” recession this spring, are no longer expecting an imminent downturn. And economists at the country’s two largest banks, JPMorgan Chase and Bank of America, recently tossed out their recession forecasts, saying they expect economic growth to continue through the end of 2024.
“The combination of strong job growth, elevated job openings, and limited layoffs is not indicative of a recession,” Michael Feroli, chief U.S. economist at JPMorgan, wrote in a research note this month. “The likelihood of a contraction has diminished.”
Bob Henig, who owns a BMW and Ducati motorcycle dealership in Jessup, Md ., expects to sell a record 550 bikes this year, up from last year’s 400. He was expecting sales to slide this year, as they did early in the Great Recession, when a sudden halt in demand led to two years of losses and layoffs.
But business is up, despite higher price tags and interest rates. Sales are on track to rise 7 percent this year — less than the 9 percent growth Henig notched last year, but still a far cry from 14 percent drop of 2009.
“There’s been all this talk of recession, and we’ve been down this road before, so we tightened our belts,” he said. “But now we’re looking around and we’re just not seeing any signs of a slowdown. Our sales keep going up.”
Underlying the good times, though, is a sense that the economy could still sour — even if not as soon, or as dramatically as previously feared. The Fed has been forcefully raising interest rates in hopes of softening the economy enough to control inflation. And although that’s beginning to work — inflation, at an annual rate of 3.2 percent, is down sharply from last summer’s peak of 9.1 percent — it’s also slowing key parts of the economy, including hiring, housing and manufacturing. Although that cool-down has so far been gradual, it isn’t clear how long that can continue.
As a result, many business owners say they’re putting investments and expansions on hold, even though demand is unusually robust. Higher costs and tougher borrowing conditions are also factoring into their decisions.
Henig, for example, is shelving plans for a new warehouse and waiting to spend $20,000 on new motorcycle lifts. When his shop recently needed a revamp, he and an employee repaired drywall, changed fixtures and painted the showroom themselves instead of hiring contractors.
“Even though we’re going full throttle, we’re being very careful about any unnecessary expenses,” he said. “I’m not taking expansion plans off the table, but I’m also not putting a shovel into the ground until I feel sure we don’t have to be in survival mode.”
Many are still waiting to see how the coming months unfold. There are signs of potential trouble — Americans are taking on record levels of debt to fuel their spending, and delinquencies on mortgages and car loans are inching up. There are also ongoing fears that the economy may still be running too hot, which could cause the Fed to keep interest rates high for longer, raising the odds of a downturn.
But for now, optimism abounds. Executives at Royal Caribbean Group, which operates 63 cruise ships worldwide, say summer travel has “significantly exceeded expectations.” The company brought in $6.4 billion in the first half of the year, double what it did in the same period a year ago. Bookings for 2024 are already at all-time highs.
“Clearly, the very healthy demand environment we are seeing is quite encouraging,” chief executive Jason Liberty said in an earnings call last month. “What has been a surprise to us has been … demand continuing to come in at significantly higher levels” even as prices go up.
It’s a similar story back in Houston, where Basu’s plastic surgery practice is fielding dozens of new calls a day. The rush started in mid-2020, when much of the country was still under lockdown. People were working from home, where they spent hours a day staring at their own faces on Zoom. “It was like a fire hydrant of demand,” Basu said. Bookings for neck lifts, facelifts and breast surgery soared to new highs.
That brisk pace has continued, even as life has returned to normal. People are booking procedures further in advance so they can schedule around vacations and in-person work commitments, Basu said. He’s continuing to hire, and hopes to add a couple more surgeons, as well as nurses and anesthesiologists.
“It’s hard to believe but we are still in expansion mode,” Basu said. “Of course it’s wise to be judicious — we read the headlines like everyone else — but there are no signs of slowing.”
POST AUTHOR: Abha Bhattarai