Is the economy in recession? Top economists weigh in
‘We should have an objective definition’
Official, NBER define a recession is “a significant decline in economic activity that spreads across the economy and lasts more than a few months.” In fact, the latest quarterly gross domestic product report, which tracks the overall health of the economy, shows second contraction in a row This year.
However, if the NBER eventually declares a recession, it could be months from now and it will affect other considerations, such as employment and personal income.
What really matters is how far their wages don’t go.
Former Acting Chairman of the White House Council of Economic Advisers
That puts the country in a gray zone, says Philipson.
“Why do we let an academic group decide?” he say. “We should have an objective definition, not the opinion of an academic committee.”
Consumers are behaving like we are in a recession
For now, consumers should focus on energy price shocks and overall inflation, Philipson added. “That’s affecting Americans every day.”
To finish, Federal Reserve is making aggressive moves to curb rising inflation, but “it will take some time for it to work its way,” he said.
“Powell is raising the federal funds rate and he is open to raising rates again,” said Diana Furchtgott-Roth, an economics professor at George Washington University and former chief economist at the Labor Department. in September”. “He’s saying all the right things.”
However, consumers “are paying more for gas and food so they have to cut back on other expenses,” Furchtgott-Roth said.
“The negative news continues to mount,” she added. “We’re definitely in a recession.”
What happens next: ‘The road leads to a gentle landing’
The direction of the labor market will be a key factor in determining the future state of the economy, both experts said.
Philipson notes that consumption falls first. “If businesses can’t sell as much as they used to because consumers aren’t buying as much, then they’re going to lay off workers.”
According to Furchtgott-Roth, “we have twice as many jobs as the unemployed, so employers are not going to fire workers quickly,” according to Furchtgott-Roth.
“That’s the path to a smooth landing,” she said.
3 ways to prepare your finances for a recession
While the effects of record inflation are being felt across the board, every household will experience the downturn to a different extent, depending on income, savings and job security. their.
However, there are some how to prepare According to Larry Harris, Fred V. Keenan, chair of the Finance Department at the Marshall School of Business at the University of Southern California, and a former chief economist for the Securities and Exchange Commission.
Here is his advice:
- Streamline your spending. “If they expect they’ll be forced to cut back, the sooner they do it, the better off they are,” Harris said. That could mean cutting some costs that you just want and really don’t need, like the subscription services you signed up for during the Covid pandemic. If you don’t use it, lose it.
- Avoid variable-rate debt. Most credit has a variable annual percentage rate, which means there is a direct link to the Fed’s benchmark, so anyone with a balance will see their interest fee increase with each Fed move. Homeowners with adjustable-rate mortgages or home ownership credit lineis fixed to the base rate, will also be affected.
That makes this a particularly good time to identify the loans you have left over and see if refinancing meaningful. “If there’s an opportunity to refinance to a fixed rate, do it now before rates rise further,” Harris said.
- Consider hoarding extra cash in Series I bonds. These inflation-protected assets, backed by the federal government, are virtually risk-free and annual interest payment of 9.62% until the end of OctoberHighest production on record.
Even though there are purchase limits and you can’t mine the money for at least a year, you will get a much better return than a one year savings account or certificate of deposit, paying only 2 %. (Rates on online savings accounts, money market accounts and certificates of deposit are all set to rise, but it will take some time.) those profits compete with inflation.)