This makes sense in some ways: since 1948, each successive quarter of negative growth has coincided with stagnation.
But the recession argument here has been severely undermined since the release of the GDP report. A series of events in the past 10 days suggests that these calls for stagnation are, at least, premature.
Consider the following developments:
- Economy added more than Half a million jobs In July alone.
- The unemployment rate fell to 3.5%, the lowest level since 1969.
- Inflation calmed down (relatively) in July for both consumers and consumers Producers.
- Gas prices fell Less than $4 a gallon For the first time since March.
- Consumer morale has Bounce back from record lows.
- The stock market had its longest streak of weekly gains since November.
Mark Zandi, chief economist at Moody’s Analytics, increased his confidence that the US economic recovery is sound.
“This is not a recession. It’s not even in the same universe as a recession,” Zandi told CNN. “It is completely wrong to say that it is.”
Of course, none of this means the economy is sound. it’s not like that. Inflation is still very high.
None of this means that the economy is out of trouble. it’s not like that.
The job market is still hot
The biggest problem in the argument that a recession has already begun is the fact that employment rose – dramatically – in July. The US added a staggering 528,000 jobs last month, bringing payrolls back to pre-Covid levels.
An economy in recession does not add half a million jobs in a month.
“I don’t think anything in the data about our current state of the economy is consistent with what we think is a recession,” Brian Dees, director of the White House National Economic Council, told CNN in a phone interview. last week.
If anything, the job market is very hot. This is a problem for the coming months as it allows the Federal Reserve to raise interest rates aggressively without causing widespread damage to the labor market in its attempt to slow the economy.
The danger is that the Fed ends up slamming the brakes so hard that it slows the economy into recession.
Finally, inflation has begun to subside
There is a growing sense that the worst may be over on the inflation front.
In addition to gasoline, diesel and jet fuel prices are also falling, relieving inflationary pressure on the rest of the economy.
The energy slowdown lowered inflation measures in July, and it should do the same, if not more, in August.
The better-than-expected inflation reports not only reflect lower energy prices, but also the easing of pressure in supply chains defended by the Covid-19 virus.
What would a recession feel like?
In some ways, the stagnation debate is semantic.
However, for many, the actual recession will be far more painful than today’s environment.
An economic recession will likely involve the loss of not just hundreds of thousands but millions of jobs. Unable to make the mortgage payments, families will face foreclosure on their homes. Small, medium and large companies will collapse.
None of these things happen in a significant way, at least not yet.
Altogether, recent economic data suggests that a potential recession may have been delayed, not canceled outright.
Zandi said that while the risk of a recession over the next six to nine months appears to have decreased, the risk of a recession in the next 12 to 18 months has risen.
“The odds of a recession remain uncomfortably high,” he said.