The US economy didn't get the recession memo - CNN

  

Category:  News & Politics

Via:  jbb  •  one month ago  •  21 comments

By:   Matt Egan (CNN)

The US economy didn't get the recession memo - CNN
The American economy didn't get the memo that it's supposed to already be in a recession.

S E E D E D   C O N T E N T



Analysis by Matt Egan, CNN Business Updated 2:19 PM EDT, Mon August 15, 2022

New York(CNN Business) The American economy didn't get the memo that it's supposed to already be in a recession.

The brutal GDP report released on July 28, showing the economy had contracted for a second quarter in a row, led some to insist the much-feared recession had already arrived.

The good, the bad and the unknown of the inflation news

And in some ways that makes sense: Since 1948, every period of back-to-back quarters of negative growth coincided with a recession.

But the recession-is-already-here argument has been severely undermined since that GDP report came out. A series of events in the past 10 days suggest those recession calls are, at a minimum, premature.

Yes, the economy is cooling off after last year's gangbusters growth. But no, it does not appear to be suffering the kind of downfall that would qualify as a recession.

Consider the following developments:

  • The economy added more than half a million jobs in July alone.
  • The unemployment rate dropped to 3.5%, tied for the lowest level since 1969.
  • Inflation chilled out (relatively speaking) in July for both the consumers and producers.
  • Gas prices tumbled below $4 a gallon for the first time since March.
  • Consumer sentiment has bounced off record lows.
  • The stock market notched its longest weekly winning streak since November.

Mark Zandi, chief economist at Moody's Analytics, has only grown more confident that the US economic recovery is intact.

"This is not a recession. It's not even in the same universe as a recession," Zandi told CNN. "It's just patently wrong to say it is."

Zandi said the only thing signaling an ongoing recession is those back-to-back quarters of negative GDP. Yet he predicted those GDP declines will eventually get revised away. And there are early indicators that GDP will turn positive this quarter.

Price hikes took a breather in July, fueling hopes that inflation has peaked

Of course, none of this means the economy is healthy. It isn't. Inflation remains way too high.

And none of this means the economy is out of the woods. It isn't.

A recession remains a real risk, especially next year and in 2024 as the economy absorbs the full impact of the Federal Reserve's monster interest rate hikes.

And it remains possible that the economy stumbles so much in the months ahead that economists at the National Bureau of Economic Research, the official arbiter of recessions, eventually declare that a recession began in early 2022. But for now, it's way too early to say that's the case.

Job market is still hot


The biggest issue in arguing that a recession has already begun is the fact that hiring ramped up -- dramatically -- in July. The United States added a staggering 528,000 jobs last month, returning payrolls to pre-Covid levels.

An economy that's in recession doesn't add half a million jobs in a single month.

"I don't think anything in the data about where we are right now in the economy is consistent with what we typically think of as a recession," Brian Deese, director of the White House National Economic Council, told CNN in a phone interview last week.

If anything, the job market is too hot. And that is a problem for the months ahead because it allows the Federal Reserve to aggressively raise interest rates without resulting in widespread damage to the labor market in its bid to slow the economy down.

The risk is that the Fed ends up slamming the brakes so hard that it slows the economy right into a recession.

Inflation is cooling off, finally


There is a growing sense that perhaps the worst is over on the inflation front.

The biggest inflation headache -- gasoline prices -- is finally easing in a big way. The national average for regular gasoline has now plunged by more than $1 since hitting a record high of $5.02 a gallon in mid-June.

Beyond gasoline, diesel and jet fuel prices are also falling, easing inflationary pressure on the rest of the economy.

The energy cooldown lowered inflation metrics in July and should do the same, if not more so, in August.

Good inflation news: Online shopping prices are suddenly falling fast

The Bureau of Labor Statistics said last week that consumer prices were 8.5% higher in July than they were a year earlier. Although that remains alarmingly high, it is down from the 40-year high of 9.1% in June. And, month over month, prices were little changed.

Wholesale inflation may also be peaking. The producer price index, which measures prices paid to producers for their goods and services, decelerated in July by more than anticipated on a year-over-year basis. And PPI declined month over month for the first time since the economy was shut down in April 2020.

The better-than-expected inflation reports reflect not just lower energy prices but easing stress in supply chains scrambled by Covid-19.

What a recession would feel like


In some ways, the recession debate is semantics.

Recession or not, Americans are clearly hurting right now because the cost of living is too high. Real wages, adjusted for inflation, are shrinking. And although consumer sentiment as measured by the University of Michigan has climbed two months in a row, it remains near record lows.

However, for many, an actual recession would be far more painful than today's environment.

A recession would likely involve the loss of not just hundreds of thousands but millions of jobs. Unable to make their mortgage payments, families would face foreclosure on their homes. And small, medium and large businesses would go under.

None of those things are happening in a significant way, at least not yet.

But flashing red lights in the bond market suggest that could change.

Gas prices tumble below $4 for the first time in months

The yield curve -- specifically, the gap between 2-year and 10-year Treasury yields -- remains inverted. And in the past, this has been an eerily accurate predictor of recessions. It has preceded every recession since 1955.

In all, recent economic data suggests that the potential recession may have been delayed, not canceled altogether.

While the risk of a recession over the next six to nine months appears to have gone down, Zandi said, the risk of one in the next 12 to 18 months has gone up.

"Recession odds are still uncomfortably high," he said.


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jrDiscussion - desc
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JBB
Professor Principal
1  seeder  JBB    one month ago

You've got to admit things are getting better, getting better all the time.

 
 
 
Split Personality
Professor Principal
1.1  Split Personality  replied to  JBB @1    one month ago

Isn't the next line "they can't get much worse"?

lol

 
 
 
Drinker of the Wry
Freshman Principal
1.1.1  Drinker of the Wry  replied to  Split Personality @1.1    one month ago
Isn't the next line "they can't get much worse"

More great bass lines from Paul.

 
 
 
Greg Jones
Professor Guide
1.2  Greg Jones  replied to  JBB @1    one month ago
"You've got to admit things are getting better, getting better all the time".

Thanks to who?  Biden?  jrSmiley_10_smiley_image.gif

 
 
 
Texan1211
Professor Principal
1.3  Texan1211  replied to  JBB @1    one month ago
You've got to admit things are getting better, getting better all the time.

So you think things are better today than when Biden was inaugurated.

Interesting what must pass as 'better' to you.

Inflation must have you giddy with joy!

 
 
 
Texan1211
Professor Principal
2  Texan1211    one month ago

I wonder how much longer we will endure temporary inflation, or if Biden has plans to call it something else?

 
 
 
Split Personality
Professor Principal
2.1  Split Personality  replied to  Texan1211 @2    one month ago

Inflation and recession are always temporary.  It's an economic cycle.

How long is anyone's guess.

 
 
 
Drinker of the Wry
Freshman Principal
2.1.1  Drinker of the Wry  replied to  Split Personality @2.1    one month ago
How long is anyone's guess.

Guess?  You don't give our government technocrats credit for the precision that they bring to our economy.

 
 
 
Split Personality
Professor Principal
2.1.2  Split Personality  replied to  Drinker of the Wry @2.1.1    one month ago

Nope. It's like rain dance, lol.

 
 
 
Drinker of the Wry
Freshman Principal
2.1.3  Drinker of the Wry  replied to  Split Personality @2.1.2    one month ago
Nope. It's like rain dance, lol.

The rain dance, like other  ceremonial dances of our various Native American people is nothing to laugh at.  The rain dance was a way to gain favor and summon rain to come down and nourish the crops that would serve as sustenance for the tribe. 

 
 
 
Split Personality
Professor Principal
2.1.4  Split Personality  replied to  Drinker of the Wry @2.1.3    one month ago

 
 
 
Texan1211
Professor Principal
2.1.5  Texan1211  replied to  Split Personality @2.1    one month ago
Inflation and recession are always temporary.

Then Biden's statements declaring it temporary were unnecessary.

Without parsing words, 'temporary' as Biden used it means different things to some folks.

Most folks I know don't consider something 'temporary' that lasts for over a year.

 
 
 
Split Personality
Professor Principal
2.1.6  Split Personality  replied to  Drinker of the Wry @2.1.3    one month ago

 
 
 
Split Personality
Professor Principal
2.1.7  Split Personality  replied to  Texan1211 @2.1.5    one month ago
Then Biden's statements declaring it temporary were unnecessary.

Maybe, but not necessarily.

Without parsing words, 'temporary' as Biden used it means different things to some folks.

Don't care what it means to some folks.

Most folks I know don't consider something 'temporary' that lasts for over a year.

Don't care what it means to "most folks you know".

Economics are a fact of life.  The effects of inflation or recession usually last much

much longer than the initial cycle.

We survived Nixon & Ford, we'll survive this too.

 
 
 
Texan1211
Professor Principal
2.1.8  Texan1211  replied to  Split Personality @2.1.7    one month ago
Maybe, but not necessarily.

Totally unnecessary, not even debatable.

Don't care what it means to some folks.

Well, of course not, if it doesn't fit your narrative!

Don't care what it means to "most folks you know".

Of course not--it doesn't fit your narrative!

Economics are a fact of life.  The effects of inflation or recession usually last much much longer than the initial cycle.

Have you ever once seen me argue otherwise?

We survived Nixon & Ford, we'll survive this too.

I am sure the nation will survive Trump and Biden too.

Big whoop! 

 
 
 
Split Personality
Professor Principal
2.1.9  Split Personality  replied to  Texan1211 @2.1.8    one month ago
I am sure the nation will survive Trump and Biden too.

Hopefully.

The trick is to buy low and know when to sell.

 
 
 
Texan1211
Professor Principal
2.1.10  Texan1211  replied to  Split Personality @2.1.9    one month ago
The trick is to buy low and know when to sell.

It is impossible for everyone to do that at one time.

Perhaps the reactionaries are able to pull it off.

 
 
 
Split Personality
Professor Principal
2.1.11  Split Personality  replied to  Texan1211 @2.1.10    one month ago
Perhaps the reactionaries are able to pull it off.

I will accept that you are speaking from personal experience and bid you a good night.

 
 
 
Texan1211
Professor Principal
2.1.12  Texan1211  replied to  Split Personality @2.1.11    one month ago
I will accept that you are speaking from personal experience and bid you a good night.

Well, common sense tells me I wouldn't include the word 'perhaps' if I was talking from personal experience. Most of my personal experience with reactionaries are on here.

 
 
 
Drinker of the Wry
Freshman Principal
2.1.13  Drinker of the Wry  replied to  Split Personality @2.1.4    one month ago

Thanks, just saw this.  I haven’t heard that song in decades.  I doubt that it means anything but I liked the beat and the droning. 

 
 
 
Split Personality
Professor Principal
2.1.14  Split Personality  replied to  Drinker of the Wry @2.1.13    one month ago

My pleasure jrSmiley_79_smiley_image.gif

 
 

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