Are we really in the Recession?

us recession

The U.S. economy contracted by 0.9 percent during the past three months.

The economy has shrunk for the second consecutive quarter. Gross domestic output, or GDP, fell by 1.6 percent annually in the first quarter.

Although two consecutive quarters of negative growth are frequently regarded as a recession, there is no official definition of the term.

The National Bureau of Economic Research, a nonprofit, unbiased agency, decides when the American economy is experiencing a recession.

That decision is made by an NBER committee of eight economists, and it is based on a variety of variables.

The White House has opposed designating the current state of the economy as a recession. It is aware of the impact the economy will have on the midterm elections, without a doubt.

In a recent appearance on NBC’s Meet the Press, Treasury Secretary Janet Yellen said that although two consecutive quarters of negative growth are often regarded as a recession, the current economic situation is distinct.

When you’re adding nearly 400,000 jobs per month, she declared, “that is hardly a recession.”

However you look at it, the economy has shrunk.

According to the GDP data, businesses have made layoffs. Without a question, as interest rates have risen thanks to the Federal Reserve, borrowing has grown more expensive. Therefore, there is less money available for investment. The main concern is whether or not that will begin to harm employment growth.

Retailers were spending less because they had a surplus of inventory to get rid of. And with mortgage rates rising, the property market, which had been heating up throughout the pandemic, is beginning to cool.

There were some positive aspects, though. People were indulging themselves by going to restaurants and travelling as wages continued to grow. Total income increased.

However, as the Fed continues to aggressively raise interest rates to combat excessive inflation, recession fears have significantly increased.

In addition, the economic data has been inconsistent.

Prior downturns, for instance, were preceded by job losses in the economy. But as Yellen pointed out, the American economy has been creating new jobs every month.

The economy is not in a recession, according to Yellen. “A recession is a period of generalised economic downturn. Right now, we can’t see that.”

Yellen also mentioned how consumer spending has continued to be robust and she emphasised encouraging information regarding American credit quality.

The White House dislikes the term “recession”

The White House has made a point of reassuring the public that even two quarters of negative growth do not necessarily indicate a recession.

The White House is painfully cognizant of the optics of a nation in recession, where Americans are experiencing financial hardship, as the November elections get near.

But a lot of Americans are already feeling the pinch as prices for a wide range of goods continue to soar and inflation is at a multi-decade high.

According to a recent Morning Consult/Politico poll, 65 percent of registered voters believe that we are already in one.

The economy is already slowing in some areas

Everyone can agree that the economy is faltering, prices are growing faster than they have in years, and the housing market has started to cool as a result of the Fed’s aggressive interest rate hikes. The central bank increased interest rates by an additional three-quarters of a percentage point on Thursday.

The headline figure on Thursday, which will show how much the economy grew or shrank on a percentage basis, is expected to draw the most attention, but economists stress the importance of examining the underlying data.

When examining GDP, Michelle Meyer, U.S. chief economist at the Mastercard Economics Institute, explains that the individual pieces are what matter.

We’ll check to see, among other things, if household spending, which makes up 70% of all economic activity, kept up with inflation.

However, as noted by Fed Chair Jerome Powell and other officials, sentiment and expectations important at a time like now, when there is so much uncertainty and so many Americans are suffering economically. The goal for the economy is also to avoid losing too many jobs.

Jobs, says Meyer, “I think a lot of it comes down to jobs.” “whether or not you work. If you anticipate keeping your job. and what that would imply for your potential future income stream.”

Source: nbcnews, yahoo finance

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