U.S. economy just had an unfavorable 2nd quarter growth. Is the economy going through a slump?
Treasury Secretary Janet Yellen noted in a recent appearance on the NBC program Meet the Press that while two consecutive periods of negative growth are typically regarded as a recession, the economic conditions of this country are different.
“When you’re creating almost 400,000 jobs a month, that is not a recession,” she claimed.
But, however you look at it the economy is dwindling.
The GDP report indicated that businesses have retrenched. In all likelihood, the cost of borrowing is becoming more costly due to the Federal Reserve ratcheting up interest rates. Therefore, there’s less money available to invest. The main concern is whether it will begin hurting job growth.
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Retailers had an abundance of inventory to deal with and so, these businesses also spent less. Housing, which has been booming in the midst of the epidemic but is beginning to cool as mortgage rates rise.
There were some positives. As wages climbed, people were pampering themselves with a meal out in restaurants, and even travelling. Overall, income increased.
But the fear of recession has been growing since the Fed continues to raise interest rates rapidly to fight the rising inflation rate.
The economic data have been rather uneven.
The Fed’s mission is unlikely in that it fights inflation without creating the possibility of a recession
In the days leading up to the previous recessions, for instance the economy was losing jobs. However, it seems that the U.S. economy has been growing month-after-month according to Yellen stated.
“This is not an economy that’s in a recession,” Yellen declared. “A recession is broad-based weakness in the economy. We’re not seeing that now.”
Yellen has also emphasized the consumer spending that is still strong. She also provided positive information regarding the credit score of Americans.
White House doesn’t like the word recession.
The White House has taken pains to remind Americans that two quarters of growth that is negative does not mean there’s recession.
With the midterm elections coming up and the midterm elections are coming up, there is a sense that the White House is acutely aware of the negative effects of a country that is in economic recession, in which Americans struggle financially. With the cost of so many things rising and inflation soaring to the highest level in decades many Americans are taking their chins off.
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What are the indicators of recession?
The NBER declares that that the “traditional definition” of a recession is “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
Employment is a factor in the calculation of the group and the market for labor has shown indications of improvement. As of the month June employment rates stood at 3.6 percent close to the pre-pandemic level and the economy created 372,000 new jobs.
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“I don’t think the NBER would look at the data right now and say the economy is in a recession,” says Michael Gapen, the chief U.S. economist at Bank of America Securities.
However, it’s unclear how much Americans will be concerned about whether or not the current economic system is in line with a particular technological definition, or if it doesn’t.
The economy is slowing in certain areas already
It’s obvious to everyone that that the pace of growth is slowing down, prices are increasing at their highest rate in decades as well as the market for housing is cooling because the Fed increases interest rates rapidly. On Thursday the central bank increased rates by three quarters of one percentage point.
The headline figure for Thursday’s data — the amount the economy expanded or contracted in percentage termswill likely draw the most attention. However, they advise to look into the deeper numbers.
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“It’s the pieces of the puzzle that matter when you’re looking at GDP,” says Michelle Meyer, U.S. chief economist at the Mastercard Economics Institute.
We’ll also examine whether household spending is responsible for 70% of economic activity, grew with the rate of inflation.
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However, like Fed Chairman Jerome Powell and other policymakers have admitted, in such a time, with so much uncertainty and so many Americans suffer economic hardship the mood and expectations are important and the most important thing for the economy to be successful is not to eliminate too many jobs.
“I think a lot of it comes down to jobs,” Meyer says. Meyer. “Whether you have a job. Whether you expect to keep your job. And what that might mean for your future path of income.”