ST. PETERSBURG, Fla — The idea of a recession is inherently bad, and it's been in the minds of many Americans — Google Trends shows it's one of the top searches. But, what does a recession mean for the everyday consumer?
Well first, we must define a recession. Although there are varying definitions among economists, one thing they all have in common is that many factors contribute to an economy being in a recession.
Technically, while the American economy does check off the boxes of what could be a recessed economy, we are still doing OK in some areas.
A few factors that indicate a recessed economy is the downturn of labor markets, consumer and business spending, industrial production and incomes, according to The White House.
"Official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data," the White House said in a statement.
The National Bureau of Economic Research's, which the White House calls the "official recession scorekeeper," determination of if the country is in a recession generally comes from this group. They are a group of economists whose Business Cycle Dating Committee defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”
Keep in mind that consecutive quarters of falling GDP constitute one informal, though not definitive, indicator of a recession.
Federal Reserve Chair Jerome Powell and many economists have said that while the economy is showing some weakening, they doubt it’s in recession. Many of them point, in particular, to a still-robust labor market, with 11 million job openings and a low 3.6% unemployment rate, to suggest that a recession, if one does occur, is still a ways off.
However, many Americans are losing confidence: Their assessment of economic conditions six months from now has reached its lowest point since 2013, according to the Conference Board, a research group. Forbes reports that when confidence declines, people don't feel confident spending money, which slows the economy.
According to the outlet, recessions can be triggered by many occurrences, such an economic shock, like COVID-19 in 2020, or excessive debt, too much inflation and even changes in technology.
What does a recession look like?
It could mean less spending on discretionary items like new clothes because essentials like gas and rent prices are inflated. It could also mean higher mortgage rates, which could cause fewer people to buy homes. Credit cards and auto loans may also have high-interest rates.
According to USA Today, being in a recession could also see the loss of jobs specifically in manufacturing and related industries, construction, tech, media and financial industries, The outlet reports that sectors that rely on more discretionary spending, such as leisure, hospitality and retail, all will lose jobs.
However, some industries like health care, legal, accounting, government and education tend to be OK, the outlet reported.
Fulton Bank reported that people with student loans can be severely affected due to a lack of finding or keeping a job in a downturned economy.
However, not one recession looks the same. Because we have stronger housing and auto markets and our labor market is remaining strong, if we do dip into a recession, Morgan Stanley reports that it will be less severe than others.
Currently, the Feds are taking action to tip the scale away from a recession. However, their actions, even though with good intentions behind them, could also raise recession risks
On Wednesday, the Feds raised its benchmark interest rate by sizable three-quarters of a point for a second straight time in its push to conquer the worst inflation outbreak in four decades. These rate hikes could possibly extend into 2023.
The Feds are hoping to achieve a difficult “soft landing”: An economic slowdown that manages to rein in rocketing prices without triggering a recession.
The U.S. economy shrank from April through June for a second straight quarter, contracting at a 0.9% annual pace.
Another thing to note is it’s also ultimately inevitable during the course of the normal economic cycle, Mark Hamrick, senior economic analyst at Bankrate, reportedly told CNBC.
“It should not be shocking that they [recessions] occur,” he said. “It is usually the timing, the cause and the depth and duration of them that catch people by surprise.”