Since earlier this year, there has been a lot of talk about an impending recession. But is this really true? Or are we just talking ourselves into a recession?
A recession is generally defined as two quarters of broad declining economic activity. To be clear, there are areas that seeing economic headwinds. However, there are a few very positive indicators to consider…which are the basis for the question.
First is labor. The US still has incredibly low unemployment rates. Companies are still scrambling to hire staff in addition to the help wanted signs that are plastered everywhere. The point is people are working and there are jobs to be had. Recessions are often driven by a pullback in economic activity which slows job growth and drives up unemployment. Neither of these are true today.
Second, the economic engine in the US is still humming along. Economies are fueled by spending…and that is still happening in the US. Granted, inflation is driving the prices for goods up. But people are still spending…which is a good thing. Recession is often the result of a slowdown in spending.
Third, tech is strong. If you look past the equity markets and their current pullback, the tech industry is stronger than ever. Companies are reliant on technology more than ever. Even if there were a slowdown in business, it would have a limited downstream effect on technology.
In past recessions, the challenge is to get the economic engine turning again. That means people working and spending their earned money which puts more people to work. When the engine stops or slows, it is hard to get it started again. Today, the engine is humming along.
So, are we talking ourselves into a recession?
Let’s assume that, hypothetically, we do experience a recession. With strong influencers like labor and spending, it is likely that we see a short-lived recession and quick bounce back.
If, however, we talk ourselves into a bigger recession, that would be problematic with more significant side effects like rising unemployment and downward economic spending.
Only time will tell. What are your thoughts?