Are we in recession or not? It depends who you ask.
By one measure, the economy is contracting. Gross domestic product — a statistic experts use to measure economic output in the United States — fell at a rate of 0.9% last quarter, according to government data released last month. This follows a contraction of 1.6% in the fiscal first quarter.
Those two quarters of negative growth are enough to satisfy what many consider to be the technical definition of a recession, although the National Bureau of Economic Research’s Business Cycle Dating Committee uses a much broader definition that takes into account personal income, consumer spending and savings. , industrial production and more. The NBER committee is tasked with officially determining when the country is and is not in a recession, but it has yet to take that step.
(However, it often does this retroactively, so we may be in a recession now.)
By other measures, the economy is doing well. The United States added more than 500,000 jobs in July, for example, indicating a strong labor market, and unemployment is very low by historical standards.
But amid rising prices — especially for essentials like groceries, gas and housing — and slowing spending, it’s hard for many ordinary consumers to believe the economy is picking up. wears well. This puzzling moment has economists, politicians and business leaders wondering if we’re in a recession or not…and if that even matters.
Here’s where some personalities fall.
No, we are not in a recession
President Joe Biden
“We are not going to be in a recession, in my opinion,” he said last week, adding that the unemployment rate remains historically low at 3.6% and business investment continues. “Hopefully we will move from this rapid growth to steady growth,” he added. “God willing, I don’t think we’re going to see a recession.”
Federal Reserve Chairman Jerome Powell
“I don’t think the United States is currently in a recession,” he told reporters last month. “And the reason for that is that there are just too many sectors of the economy that are working too well,” he added. He then pointed specifically to jobs: “It’s a very strong job market… 2.7 million people hired in the first half? It doesn’t make sense for the economy to be in a recession with this kind of thing going on. »
David Mericle, chief US economist at Goldman Sachs Research
Beyond GDP, “indicators of economic activity – wage employment, real personal income net of government transfers and industrial production – increased in the first half of this year”, he said in a research note. Mericle added that while it will be difficult to bring inflation down without hurting the economy, “I don’t think we’ve fallen into a recession yet.”
Yes, we are in a recession
Cathie Wood, CEO of ARK Invest
“We’re in a recession,” she told CNBC in late July, citing excess inventory at major retailers like Target and Walmart. Wood added that the jobs data, which has been the subject of the Federal Reserve and the Biden administration, is a lagging indicator.
A majority of American adults
Almost two-thirds of voters think the country is in a recession, according to a recent Morning Consult poll. Nearly 8 in 10 Republicans polled said they believed a recession was coming, compared to just over 50% of Democratic respondents.
“We’re in a recession, and that’s going to make it worse,” Sen. Lindsey Graham, RS.C., said at a news conference last week, referring to the Managed Inflation Reduction Act. by Democrats. “I’m glad we have strong job growth,” added Sen. Bill Cassidy, R-La., “but we’re in a recession,” citing the rapidly cooling housing market as evidence.
The third option: Maybe soon?
Other experts say that while we’re probably not in a recession right now, there’s a good chance we’ll be heading into a recession in the coming months.
“Are we in a recession? We don’t think so yet,” said Joel Prakken, chief economist at S&P Global Market Intelligence, recently. New York Times. “Are we going to be one? It’s a high risk. »
Harvard University economists Alex Domash and Larry Summers, the latter a former Treasury Secretary under President Bill Clinton and an economic adviser to President Barack Obama, argue that the combination of high inflation and low unemployment indicates a “substantial likelihood” of a recession. in the next two years.
At the end of the line ? The economy is in a strange place. It contracts by some measures and expands by others, leading experts to be divided on their predictions. What is certain is that recessions – and expansions, for that matter – are an integral part of the business cycle, and there are ways to prepare for a downturn.
It’s true whether it happens in a few weeks, a few months or a few years.
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