Recession fears are undermining consumer confidence, and could play a major role in the outcome of this year’s midterm elections. But we are not in a recession, and it is known that economic recessions are difficult to predict.
why does it matter: The United States is struggling with levels of inflation not seen in 40 years. For the public struggling with rising prices, this can feel like a slump.
- Inflation and recession are two very different things. For now, we’re still seeing solid growth – even after accounting for inflation. However, the economy’s momentum has slowed, and headwinds are on the rise.
context: Recession times are officially determined by the Business Cycle Dating Committee of the National Bureau of Economic Research. And most are brief: The 2020 recession, the deepest in recent memory, lasted just two months.
In numbers: Prices are rising at an annual pace of 8.5%, according to inflation data released Tuesday morning. This is high, but still slower than the rate of growth of the economy.
- In the fourth quarter In 2021, GDP grew by a staggering $800 billion, at an annual rate of 14.5%. Much of that was due to higher prices, but even when you get rid of the effects of inflation, the growth rate has remained very high at 6.9%.
- in 2022, Wall Street expects the economy to grow at a healthy 3.3%, according to FactSet – distance Subtract inflation.
The Big Picture: During a recession, it is difficult to find work, layoffs increase, and spending decrease. None of this is happening now.
- Even the most pessimistic economic forecasters Don’t expect a recession until the end of 2023, after a series of Fed rate hikes that haven’t yet occurred.
Bottom line: For casual signs that we might be in a recession, first look at our employers. If jobs run out, and layoffs become more common, it would be a sign that the economy is heading south.