Recession or No? GDP numbers don’t clarify much.

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All year, the big economic questions have been:

  • How high will inflation go?
  • What can we do to stop it?
  • Will fighting inflation lead to a recession?

The answers have generally been:

  • We don’t know, but hope *this* month will be the apex.
  • Aside from the Fed raising interest rates, which they have consistently done all year, not much.
  • It usually does, so we expect it to here, although the current state of the economy is still murky.

Generally speaking, while there is no concrete singular definition of “recession,” it is commonly referred to as 2 consecutive quarters of a decline in gross domestic product (GDP). However, a recession also typically means high unemployment along with declines in consumer spending and industrial production.

So, the first quarter of 2022 saw GDP decline at an annual rate of 1.6% (after the 4th quarter of 2021 saw a 6.9% increase). The second quarter saw another decrease, although this time it was “only” at an annual rate of 0.6%. So, we were in a recession, right? Well…..unemployment has remained low (current rate is 3.5% and has hovered between 3.4–3.8% all year) and 263,000 jobs were created in September, with similar job creation numbers each month all year. Meanwhile, wages have been increasing, too, up 8.57% over last year.

And now the other wrinkle, GDP in the 3rd quarter rose at an annual rate of 2.6%. Analysts say this is largely due to increases in international trade, which the decreases in the first half of the year accounted for the decline in GDP the first two quarters, demonstrating the volatility of that sector of the economy.

Inflation is still an issue, and the Fed keeps raising the prime interest rate. It now sits at 6.25%, up from 3.5% in March. The primary impact can be seen in how mortgage rates have increased.

This may help cool the housing market as fewer people are able to afford loans, or afford as much of a purchase price. We shall see.

In short, by any measure, it looks like we are not *technically* in a recession right now. However, what is coming is still very much up in the air. So, the economic outlook remains a mixed bag.

I’ll keep you posted.