Every quarter of negative growth since 1948 coincided with a recession.
However, since the GDP report was released, the claim that the recession has already begun has been greatly undermined. A series of events over the past 10 days suggests that these signs of recession are at least premature.
Consider the following deployments.
- The economy created more than half a million jobs in July alone.
- The unemployment rate fell to 3.5%, the lowest level since 1969.
- Inflation cooled (relatively speaking) in July for both consumers and producers.
- Gasoline prices fell below $4 a gallon for the first time since March.
- Consumer sentiment has recovered from record lows.
- The stock market posted its longest winning streak since November.
Moody’s Analytics chief economist Mark Zandy has become more confident that the U.S. economic recovery is intact.
“This is not a recession. It’s not even the same world as a recession,” Zandi told CNN. “It’s plain wrong to say yes.”
Of course, this does not mean that the economy is healthy. it’s not. Inflation is still too high.
And this doesn’t mean the economy is out of the woods.
Job Market Still Hot
The biggest problem with claiming the recession has already started is the fact that employment increased dramatically in July. The US added a staggering 528,000 jobs last month, bringing salaries back to pre-Covid levels.
An economy in recession doesn’t add half a million jobs in a month.
“Nothing in the data about the current state of the economy matches what we normally think of as a recession,” Brian Dees, director of the White House’s National Economic Council, said in a telephone interview with CNN. I think,’ he said. last week.
If anything, the job market is too hot. And that’s a matter of the coming months as it allows the Federal Reserve to aggressively raise interest rates without causing widespread damage to the labor market to slow the economy.
The risk is that the Federal Reserve will hit the brakes hard, slowing the economy into recession.
Inflation finally subsided
Perhaps on the inflation front, there is a growing sense that the worst is over.
Not only gasoline, but also diesel and jet fuel prices are falling, easing inflationary pressures on the economy as a whole.
The energy cooldown should lower July’s inflation indicator and August to do the same, if not more.
The better-than-expected inflation report reflects not only lower energy prices but also easing stress on supply chains disrupted by Covid-19.
what does depression feel like
In a way, the recession argument is semantic.
But for many, an actual recession would be far more painful than the current environment.
A recession could cost millions, not just hundreds of thousands of jobs. Mortgage payments are no longer possible and the family faces a foreclosure on their home. And small and medium enterprises, large corporations will go bankrupt.
None of these things are happening in any significant way, at least not yet.
Overall, recent economic data suggests that a potential recession may have been delayed rather than canceled outright.
The risk of a recession in the next six to nine months appears to have decreased, but the risk of a recession in the next 12 to 18 months has risen, according to Zandi.
“The odds of a recession remain uncomfortably high,” he said.