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  • Priscilla Asonibare

Is the U.S. Economy in a Recession?

Updated: Aug 15, 2022

Even though the U.S produced 528,000 jobs in July according to CNBC reports, it does not necessarily imply that there isn't a recession looming. Oftentimes, a recession is marked by a country's gross domestic product (GDP) falling for two quarters back to back. And the results shared by the Bureau of Economic Analysis two weeks ago prove this might just be the case for the US: GDP dropped by 1.6% in Q1 and 0.9% in Q2.

While the National Bureau of Economic Research has not called a recession yet, with each passing day Americans are struggling as a result of rising borrowing costs, soaring prices for goods and services, and nationwide job losses.

In an effort to contain inflation, which is at its highest level in more than 40 years, the Federal Reserve is making an effort to reduce pressures on historically tight labor markets and rapid pay increases. Jim Baird, Chief Investment Officer at Plante Moran Financial Advisors, says

The fact of the matter is this gives the Fed additional room to continue to tighten, even if it raises the probability of pushing the economy into recession. It’s not going to be an easy task to continue to tighten without negative repercussions for the consumer and the economy.

Frank Steemers, Senior Economist at The Conference Board also provided his insights saying

While economic output contracted for two consecutive quarters in the first half of 2022, a strong labor market means that currently, we are likely not in recession. However, economic activity is expected to further cool towards the end of the year and it is increasingly likely that the U.S. economy will fall into recession before year-end or in early 2023.

Moments like this require that we all gather the facts to protect our financial position as it is impossible to predict the future with certainty. It is important to remember that recessions are a normal part of any economy and that they typically last for only a short period before we experience periods of growth again - which often last much longer.

Read more here.

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