And in a way this makes sense: since 1948, every period of consecutive quarters of negative growth has coincided with a recession.
But the recession is already here argument has been greatly weakened since the GDP report came out. A series of events in the past 10 days suggest that these recession calls are, to say the least, premature.
Consider the following developments:
Mark Zandi, chief economist at Moody’s Analytics, has only become more confident that the US economic recovery is intact.
“This is not a recession. It’s not even in the same universe as a recession,” Zandi told CNN. “It’s patently wrong to say it is.”
Of course, none of this means the economy is healthy. it is not Inflation remains too high.
And none of this means the economy is out of the woods. it is not
The biggest problem with the argument that a recession has already begun is the fact that hiring increased – dramatically – in July. The United States added 528,000 jobs last month, returning payrolls to pre-Covid levels.
An economy that is in recession does not add half a million jobs in a single month.
“I don’t think any of the data about where we are right now in the economy is consistent with what we normally think of as a recession,” Brian Deese, director of the White House National Economic Council, told CNN in an interview telephone last week.
If anything, the job market is too hot. And that’s a problem for the coming months, as it allows the Federal Reserve to raise interest rates aggressively without causing widespread damage to the labor market in its bid to slow the economy.
The risk is that the Fed ends up tightening so hard that it slows the economy down to a recession.
There is a growing sense that the worst may be over in terms of inflation.
Beyond gasoline, diesel and jet fuel prices are also falling, easing inflationary pressure on the rest of the economy.
The energy cooling reduced inflation metrics in July and should do the same, if not more, in August.
The better-than-expected inflation reports reflect not only lower energy prices, but also reduced stress on supply chains disrupted by Covid-19.
In some ways, the recession debate is semantic.
However, for many, a real recession would be much more painful than the current environment.
A recession would likely involve the loss of not just hundreds of thousands, but millions of jobs. Unable to make mortgage payments, families would face foreclosure on their homes. And small, medium and large companies would fall.
None of these things are happening in a significant way, at least not yet.
Taken together, recent economic data suggests that the potential recession may have been delayed, not canceled altogether.
While the risk of a recession in the next six to nine months appears to have gone down, Zandi said, the risk of a recession in the next 12 to 18 months has increased.
“The odds of a recession are still uncomfortably high,” he said.
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