When does a recession begin – and is the US in one now?
Is the US in a recession? It’s a question weighing on consumers, politicians and investors around the world. Today we got one step closer to answering it. And the answer is: maybe?
For many, the unofficial rule of thumb is that a recession has started after two consecutive quarters of economic contraction measured by a fall in gross domestic product (GDP) – a broad measure of the price of goods and services. In the first three months of the year GDP contracted at an annual rate of 1.6%.
Today the commerce department announced that GDP shrank again by an annual rate of 0.9% in the second quarter.
Not so fast. Officially, the National Bureau of Economic Research (NBER) – a non-profit group of economists – defines when the US is in a recession.
The NBER looks at GDP but also at employment figures, personal income, industrial production and other factors. It defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months”.
Federal Reserve and administration officials would also prefer the public not to think of a recession as defined purely by GDP – and presumably not to think about it at all – so they are stressing that the picture is more complicated.
Yes and no. Look at the jobs market. The unemployment rate is 3.6%, near a half-century low. Wages are also rising, although not as quickly as inflation, and 2.7 million people were hired in the first half of the year.
But at the same time, consumer confidence has collapsed, inflation is causing real hardship even for those with jobs, the once white-hot housing market is cooling fast in some areas, stock markets are jittery, to say the least. On top of that, you can bet that were the Republicans in power,
Read more on theguardian.com
