You’re likely reading about an “impending recession,” which sounds kind of scary, especially for those of us who remember the Great Recession of 2008-9. The question right now is: are we already in a recession, or just experiencing another bump in the roller coaster?
Most recessions have had two or more consecutive-quarter declines in total economic activity—the Gross Domestic Product, or GDP. Recession have happened 33 times since our government began keeping score in 1854, so it is not particularly unusual.
Recently, we experienced what many say is an indicator of a recession. According to the U.S. Bureau of Economic Analysis, the U.S. economy recorded a rather significant 1.5% decline in overall growth in the first three months of 2022, led by decreases in motor vehicle sales and utility activity. But we are very far from the unemployment rate ‘target’—unemployment today is running at about 3.6%. And, of course, there is that other quarter of decline that would need to happen.
The Great Recession was a small blip on the overall growth trajectory of our economy, but the start of the pandemic delivered a huge blow to growth, followed by an almost equally remarkable recovery. The current decline is fairly moderate in comparison.
The U.S. is hardly alone in its first quarter malaise; overall, the GDP of the world’s developed economies rose by just 0.1% over the first three months of the year, with Italy, Japan and France all experiencing moderate declines. The persistence of the Omicron Covid variant, continuing supply chain snafus and, of course, the war in Ukraine all seem to be temporary factors—although it must be admitted that many economists thought of them as temporary months or even years ago. Consumers and business in the U.S. are still spending and investing; if that changes, then the recession predictions might—at some point we cannot predict—come true.
This article was written by an independent writer for Brewster Financial Planning LLC and is not intended as individualized legal or investment advice.