While to an outside observer the start of 2023 may look great: strong household balance sheets and a stable labor market, the outlook for the future doesn’t look so rosy. And it’s all about companies trying to keep up with strong consumer demand, which in turn will keep inflation above the Fed’s 2% target, which will only further fuel the central bank’s actions, writes Business Insider.

The Fed has explicitly stated that rising unemployment will be its way of reaching its inflation target, so it will continue to raise the rate until there is a significant deterioration in the labor market, that is, layoffs that will cover not one, but several sectors at once. This was explicitly stated by Fed Chairman Jerome Powell when he said it would take “pain” to bring inflation down.

And while the Fed’s actions have slowed business activity in some areas, most notably the housing market, the overall economy is still afloat and even more so: instead of slowing down, it is preparing for growth over the next few months.

The Fed has hinted that it may soften its rate hikes as inflation begins to fall, but a sudden uptick in the economy may force it to “push the gas pedal all the way up” again.

As paradoxical as it may sound, the fact remains that despite constant claims that the US economy has been teetering on the brink of recession all year, it has proven to be quite resilient and there are even signs that it will get stronger.

The most obvious reason for this is that supply chain pressures are easing: instead of empty shelves in stores, businesses have been able to replenish inventory and people can spend their money on what they need. Demonstrating this situation is increased auto sales, which reached an annualized rate of 14.9 million in the U.S. in October, the best since January. In addition to automobiles, other industries that could boost the economy in 2023 are also seeing growth. For example, airplane manufacturers such as Boeing (NYSE:BA), which is seeing new orders coming in.

As for the housing and new commercial real estate market, although it was hurt by the Fed’s rate hike, after the initial shock and the leveling off of mortgage rates, consumers are back to actively buying real estate.

Finally, even the international issues that shook the world in 2022, from geopolitical conflict to the energy crisis in Europe to China’s COVID-19 policy, will almost certainly not worsen further and will likely show signs of improvement.

Even financial market conditions are improving. Bank of America’s (NYSE:BAC) Global Financial Stress Index, which attempts to reflect the health of the stock and bond markets, has improved in more than a month, and the stock market rally and improvement in the corporate debt market no longer speaks in favor of an approaching recession.

Hence the rather ambiguous conclusion: since the economy is growing instead of slowing, the Fed may change tactics and embark on even steeper tightening until real growth turns around. For the average American, a robust economy is a two-way stick, and their ability to survive a Fed rate hike and record high inflation today could hurt them in the future. So the pain promised by Powell will come, but the only question is when.