Recession in the United States of America: An Economist’s Nightmare

US dollar, stock market drops

Recession. It is a word so intimately associated with distress and panic by the public, and appears to constantly be on the tip of everyone’s tongue. The United States of America now reconciles with one of the largest craters in economic growth in its history as a result of the pandemic. Though a sense of return to normalcy has flooded the country, the outbreak of the War in Ukraine has created new impediments to the U.S. economy, which raises the prominent question: Is the U.S. in a recession?  

Many economists define the term “recession” as back-to-back quarters of negative growth in gross domestic product (GDP). For centuries, economists have derived conclusions and given birth to theories based on past data and information. This traditional system does not serve as a fitting measurement of the current abnormal state of the world economy. The traditional understanding of a recession connotes the mass loss of jobs, the decrease of consumer spending, the withdrawal of major investments, and a slowing pace of production. Though the U.S. economy has satisfied the definition of recession with two consecutive negative quarters in net GDP, it does not follow the conventional understanding of a recession due to the abnormal factors at play. 

The U.S. economy was stunted by the COVID-19 pandemic, and in attempts to deal with the economic hardships wrought by mass quarantine, the federal government issued stimuli to help families and households get back on their feet. This policy, however, spiked inflation and now engenders problems for the post-pandemic economy. The rising inflation rates broke the former structurally anchored inflation system. The expectation of this system to follow through resulted in reduced volatility and a better business environment, which failed after the mass printing of money during the pandemic. Many experts say breaking this very system was worse than the market downturn that followed. Today, due to the supply chain issue earlier in the year, the general public still worries about continually rising inflation rates. 

Market trends are often defined not by the words, but rather by the actions of the consumer. The United States currently hosts one of its strongest labor markets of the past century, yet companies are having trouble filling their newly-created job opportunities. The thought of recession on the minds of the people is overweighed by the underwhelming rush to find stable jobs. This trend is backed up by the half-century-low unemployment rate. Households’ balance sheets are thriving from the influx of cash, even during a time of mass inflation. Currently, the U.S. economy is not sitting through a recession, but merely a unique macroeconomic period. The strength of the economy is seemingly still prevailing, though the Conference Board, a non-profit economic research organization, suggests that if inflation rates and wages continue to rise, a recession could be in the cards for 2023. 

In contrast to public opinion, having been submerged in a plunder of economic difficulties, the U.S. economy is not in a recession. Instead, the United States is going through a novel period of economic change that can only be described as an anomaly. Only time will tell what the fate of the economy will be in the coming year.

By Sami Tokat

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