The top business stories of 2023: AI, inflation, Elon Musk, and Taylor Swift take center stage

Inflation faced a reversal in fortunes.

Artificial intelligence went mainstream – for better or for worse.

Unions used their growing power to win more generous wages and benefits.

Elon Musk rebranded and rebranded the social media platform Twitter, removed safeguards against false or obscene posts, and cried foul as advertisers fled in droves.

America’s housing market, straining under the weight of high mortgage rates, took a hit.

And Taylor Swift’s concert tour scaled to such stratospheric heights that she revived some regional economies and got a mention in the Federal Reserve proceedings.

A look at the top 10 business stories in 2023:

FINANCE AGAINST INFLATION

The Fed and most other major central banks spent most of the year wielding their interest rate weapons against the worst inflation in four decades. The problem had erupted in 2021 and 2022 when the global economy roared out of a pandemic recession, causing supply shortages and driving up prices.

By the end of 2023, however, the Fed, the European Central Bank and the Bank of England had taken a breather. Their aggressive rate hikes had lowered inflation from the peaks of 2022, when Russia’s invasion of Ukraine sharply increased energy and grain prices and fueled price spikes.

In the US, central bank policymakers delighted Wall Street investors by announcing in December that 2024 would likely be a year of rate cuts – they expect exactly three – rather than a year of rate hikes. The Bank of England and the ECB sounded more cautious, suggesting that inflation, while on a downward trend, remained above its target.

“Should we lower our guard?” ECB President Christine Lagarde told reporters. “We’re asking ourselves that question. No, there’s no way we should let our guard down.”

The Council on Foreign Relations, which tracks interest rates in 54 countries, noted that central banks turned aggressively toward inflation in the spring of 2022. According to the council, policy remains tight, but the general anti-inflationary stance has eased.

AI GOES MAINSTREAM

Artificial intelligence entered the public consciousness this year. But even if the technology dazzles with its ability to retrieve information or produce readable prose, it has not yet lived up to people’s science fiction fantasies of human-like machines.

ChatGPT was the AI fan catalyst of the year. The chatbot gave the world a glimpse of advances in computer science, although not everyone properly learned how it works or how to make the most of it.

Concerns grew as this new set of generative AI tools threatened the livelihoods of people who write, draw, gossip or code for a living. AI’s ability to produce original content helped fuel strikes by Hollywood writers and actors and legal challenges by bestselling authors.

By the end of the year, the AI crises had moved to ChatGPT’s own manufacturer, OpenAI, which was nearly destroyed in the company’s turmoil over its CEO, and to a boardroom in Belgium, where European Union leaders emerged after days of negotiations on a world deal. the first important legal guarantees for artificial intelligence.

EMPLOYEE POINTS

The long-maligned American labor movement flexed its muscles in 2023, taking advantage of a widespread labor shortage to demand and receive vastly improved pay and benefits. According to Cornell University’s Labor Action Tracker, 510,000 workers staged 393 strikes in the first 11 months of 2023, from Hollywood writers and actors to auto and hotel workers.

Under its nefarious new president, Shawn Fain, the United Auto Workers hit out at the big three automakers—Ford, General Motors, and Stellantis, the parent company of Chrysler, Jeep, and Ram—and won higher wages, better benefits, and a host of other concessions.

As a result of their walkouts, Hollywood Writers and Actors received higher wages and protection from unlimited use of artificial intelligence, among other concessions.

The union gains marked a recovery for workers after the Great Recession of 2007-2009, when union power weakened further, wage increases weakened and employers appeared to have a choice of job seekers. The explosive economic recovery from the 2020 COVID-19 recession and a wave of retirements sent companies scrambling for workers and gave unions new leverage

Yet unions remain a shadow of what they once were: Last year, about 10 percent of U.S. workers belonged to a union, down from significantly less than 20 percent in 1983. And in the 1970s, the U.S. experienced an average of 500 strikes a year involving 2 million workers , said Johnnie Kallas, a Cornell workforce specialist.

MUSKIN’S X-CLASSED MODIFICATION

A little over a year ago, Elon Musk walked into Twitter’s San Francisco headquarters, fired its CEO and other top executives, and began transforming the social media platform into the X it is today.

Since then, the company has been bombarded with alleged misinformation, suffered significant advertising losses and suffered a drop in usage.

Disney, Comcast and other high-profile advertisers stopped spending on X after the liberal advocacy group Media Matters released a report showing their ads appeared alongside Nazi-glorifying material. (X has sued the group, claiming it “fabricated” the report “to drive advertisers off the platform and destroy X Corp.”

The problems came to a head when Musk ranted in an on-stage interview about companies that had stopped spending on X. Musk claimed that the disaffected advertisers were practicing “extortion” and using profanity to say “go away”.

“Don’t advertise,” X’s billionaire owner said.

A LUCKY YEAR FOR THE APARTMENT

In 2023, the US economy and labor market largely escaped the pain of the Fed’s relentless inflation campaign – 11 rate hikes since March 2022.

Not so in the housing market.

When the central bank raised interest rates, the average interest rate on 30-year fixed-rate mortgages rose from 4.16 percent in March 2022 to 7.79 percent in October 2023. Home sales collapsed. During the first 10 months of 2023, sales of previously occupied apartments fell by 20%.

Still, at the same time and despite the decline in sales, housing prices continued to rise. The combination of high mortgage interest rates and rising prices made owning an apartment – or the possibility of changing to another apartment – impossible for many.

The squeeze was caused by a serious shortage of apartments for sale. This was also a result of higher interest rates. Homeowners who were sitting on very low mortgages didn’t want to sell their house only to buy another one and take out a new mortgage at a much higher interest rate. Mortgage giant Freddie Mac says 60 percent of outstanding mortgages still have interest rates below 4 percent; 90% is less than 6%.

CRYPTO CHAOS (CONTINUED)

If 2022 was the year the cryptocurrency industry collapsed, 2023 was the year it reflected its collapse.

The year’s crypto headlines were dominated by verdicts and legal settlements as regulators in Washington took a much more aggressive stance toward the industry.

A jury convicted Sam Bankman-Fried, founder and former CEO of crypto exchange FTX, of bank fraud and six other charges. Weeks later, Binance founder Chengpeng Zhao agreed to plead guilty to money laundering charges as part of a settlement between US authorities and the exchange. Other crypto heavyweights that ran into legal trouble included Coinbase, Gemini, and Genesis.

However, speculation that the crypto may gain more legitimacy among investors helped more than double the price of bitcoin. After years of delays, regulators are expected to finally approve a bitcoin exchange-traded fund. Whether that proves to be enough to sustain bitcoin’s rise in the long term remains to be seen.

BANK JITTERS

Historically, high interest rates benefit banks; they can charge more on their loans. But in 2023, higher prices poisoned a handful of them.

The industry suffered from a banking crisis not seen since 2008. Three mid-sized banks—Silicon Valley Bank, Signature Bank, and First Republic Bank—collapsed.

Banks had already filled their balance sheets with high-quality mortgages and state treasury for years. In an era of very low interest rates, these mortgages and bonds paid little interest.

Enter the ghosts of inflation and the Fed’s aggressive rate hikes. As interest rates rose, the value of bank bonds collapsed because investors could now buy new bonds at a much juicier yield. As the pressure on the banks increased, some eager depositors withdrew their money. After one such bank round, Silicon Valley collapsed. Days later, Signature Bank failed. First Republic was seized and sold to JPMorgan Chase.

Investors remain concerned about mid-sized institutions with similar business models. Trillions of dollars of commercial real estate loans left on the books of these banks could become problematic in 2024.

THE GLOBAL MARKETS RALLY

Stock markets rose from Austria to New Zealand through 2023. As inflation slowed, stocks rose despite the slow growth of the global economy.

The drop in the price of crude oil slowed down inflation. A barrel of international Brent crude fell 14% by mid-December on expectations that the world has more than enough oil to meet demand.

The index, which covers nearly 3,000 stocks from 47 countries, returned 18% in US dollar terms as of December 11. Good gains in Apple, Nvidia and other US Big Tech stocks largely contributed to the rise. Likewise, a 45% return for Danish pharmaceutical company Novo Nordisk, which sells the obesity drug Wegovy, and a 33% return for Dutch semiconductor company ASML.

The bond market endured more turbulence. Bond prices collapsed for much of the year and their yields rose on uncertainty about how far central banks will go in raising interest rates to curb inflation.

The yield on the US 10-year Treasury note briefly rose above 5% in October to the highest level since 2007. The yield has since weakened on expectations that the central bank would raise interest rates.

SUSTAINABILITY OF THE GLOBAL ECONOMY

Over the past three years, the global economy has taken one hit after another. A devastating pandemic. Disruption in energy and grain markets due to Russia’s invasion of Ukraine. Resurgence of inflation. Penalizing interest rates.

And yet economic output continued to grow in 2023, albeit moderately. Optimism grew out of a “soft landing” – a scenario where high prices curb inflation without causing a recession. The head of the International Monetary Fund praised the global economy for its “remarkable resilience”.

The United States has led the way. The world’s largest economy has continued to grow, defying predictions that high interest rates would cause a US recession. And employers have continued to hire at healthy rates, spurring consumption.

Still, the accumulated shocks restrain growth. The IMF expects the world economy to grow by only 2.9 percent in 2024, from the 3 percent expected this year. A major concern is the weakened China, the world’s second largest economy. Its growth is hampered by the collapse of the overbuilt real estate market, declining consumer confidence and high youth unemployment.

US ECONOMY (TAYLOR’S VERSION)

Taylor Swift dominated popular culture with a record-breaking Time magazine Person of the Year award and a high-profile romance with Kansas City Chiefs football star Travis Kelce.

The Swift phenomenon went even further. It extended to the national economy. Her name came up during a July news conference by Fed Chairman Jerome Powell when Powell was asked if Swift’s ticket sales success revealed anything about the state of the economy. Although Powell avoided a direct answer, Swift’s name came up that month in the Fed’s regional budget report: Her tour was credited with boosting hotel bookings in Philadelphia.

Morgan Stanley economist Sarah Wolfe has calculated that Swifties spent an average of $1,500 on airfare, hotel rooms and concert tickets for their shows (though it’s perhaps worth noting that Beyonce fans spent even more – an average of $1,800).