A recession is defined by two consecutive quarters of decline in GDP. Maybe the fourth quarter of last year shouldn’t count. GDP rose 0.7%, but that was a downward revision. And, the current quarter is in deep trouble. And the trouble is getting deeper by the day. We are in a recession, and it will be a deep one.
The official definition of a recession is when the National Bureau of Economic Research (NBER) declares one.
Unemployment was among the first signs of trouble. Jobs lost in February hit 92,000. (Note that this could be worse when the next revision is issued.) Unemployment reached 4.4%.
Inflation has already started. With gas prices rising at the current rate, they could reach $4 per gallon of regular nationwide within two weeks. (They are $3.80 and rising fast.) It is worth remembering that when economists panicked when the CPI reached 9.1% in June 2022, oil and gas prices were a major contributor.
The costs of other everyday items will begin to rise as well. The tankers that travel through the Strait of Hormuz carry more than crude. Much of what is in those ships is part of the global supply chain.
Inflation robs Americans of discretionary income. Nothing starts a recession faster.
A great deal of the wealth Americans have gained over the last three years has come from the phenomenal run-up in the stock market. The stocks that led that charge, known as the Mag 7, have already stumbled. People are not used to it, but the markets are slightly down so far this year. Unemployment and inflation will become a drag.
FRED shows that after a jump in home prices, the value of a house has been flat to down over the last two years. And, home sales have been slow because of high mortgage rates. Home equity is locked up, and much of it belongs to older Americans. It is like a savings account you can’t get into.
If there is a single trigger from a sharp contraction in GDP, it is the Middle East conflict, but there are plenty of other economic indicators that signal trouble.
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