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What does it mean to be in a recession? Checking the indicators as the US economy slows

With GDP falling 0.9 percent for the second straight quarter over the past three months, there are fears that the US economy could slide into recession. GDP fell by 1.6 percent annually in the first quarter. Data released on July 28, 2022 shows that consumer and industrial spending have declined over the past two years.

President Joe Biden raised the matter with a number of White House staffers and informed reporters:

That doesn’t sound like a recession to me

Despite the country’s GDP contracting for two consecutive quarters, US Treasury Secretary Janet Yellen dismissed claims that the country was in recession. She also didn’t completely rule out the prospect.

The US is not currently experiencing a recession, said Federal Reserve Chair Jerome Powell, speaking to the media on July 27.

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Economic performance in too many areas is just too strong, which is the cause.

So let’s try to understand this economic phenomenon and the cautionary tales that a nation is experiencing its effects.

The essential information about “recession” and its causes

According to the National Bureau of Economic Research website, the phrase means:

Real GDP, real income, employment, industrial production, and wholesale and retail sales typically show a sizeable contraction in economic activity that spread across the economy and lasted more than a few months.

The country’s economic output declines during this period, and individuals and businesses experience financial difficulties.

However, a recession is not characterized by a quarter or two-quarter decline in GDP. Instead, it is associated with a sustained, sharp decline in economic activity across all sectors, including poor manufacturing and commodity sales, high unemployment, and stagnant or falling wages.

These are some of the main causes of this phenomenon:

1) Economic shock: The recent coronavirus epidemic had an unexpected impact on almost all sectors of the economy.

2) Excessive inflation or deflation: When prices rise or fall extremely, the economy is affected because people’s purchasing power is unstable.

3) High Debt: The 2008 housing bubble showed that people often have trouble paying off loans when they have high debt. The result is a stagnant economy.

4) Advanced technology: The rapid rise of technology and machines can inadvertently contribute to a recession because it reduces job prospects for individuals.

When the economy falters, many people often lose their jobs. Others may see their commissions and benefits reduced or cut. Companies can choose to keep or increase an individual’s bonus while they wait. In these circumstances, people usually lack the ability to negotiate. Because everyone prefers to postpone their purchases, companies are suffering.

Many people who are laid off during a recession lose their work-based health insurance. In this case, an individual may purchase health insurance through the Health Insurance Marketplace or under the Consolidated Omnibus Budget Reconciliation Act (COBRA) within 60 days of losing their benefits.

Because someone is more likely to default on a loan, lenders are also becoming more selective about making loans.

However, according to Treasury Secretary Yellen, the US has created a number of jobs for its residents, so the nation is not in danger.

“That’s hardly a recession when you’re adding around 400,000 jobs a month.”
Added him:

“A recession is a time of general economic downturn. We can’t see that at the moment.”
The economic development in the following quarter will be decisive.