Is the US Economy in a Recession?

Is the US Economy in a Recession? ...

If there wasn't so much on the line, you might assume that Americans' constant mention of being in a recession had become a sort of loopy parlor game for the policymaking in-crowd.

From Europe's top regulators who predict that the country will soon be in a deep recession, to America's more adamant market watchers and the Federal Reserve, you can find someone to argue either side equally eloquently anywhere.

The reality is that the term "recession" has quite clear cut parameters for a definition, and by those parameters, the United States has been in a recession for a while now, and may sink deeper into one this fall.

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Thomas Samuelson, Vineyard Global Advisors' chief investment officer, said that, by all traditional estimates, a recession is at least somewhat upon us.

That doesn't mean that the market will never be able to define what a recession is like, especially when it comes to areas that are virtually unprecedented, such as a two-year-plus epidemic, record low unemployment, and 40-year high inflation.

"Some are claiming that this time is different, citing the robust labor market and rising wages as evidence that we aren't in a recession," Samuelson said.

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The market and its regulators must pay close attention to certain benchmarks in order to avoid a recession and all of the associated policymaking and safeguards that come with it.

Samuelson said the average bear market decline is 25% over a 7-month period, which we hit at the June 17th low of this year. If we go back and retest the June lows, that is a 14% decrease from today's close."

Mayra Rodriguez Valladares, the managing partner of MRV Associates, a financial consulting and research organization, said the horizon may recede as America prepares for an uncertain autumn.

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Samuelson said that while "the jury is still out on whether or not we will have a recession," the National Bureau of Economic Research (NBER) has always declared one after two consecutive quarters of weak GDP growth.

"It's also possible that the recession will be milder than average due to the robust labor market and the Fed's apparent willingness to allow the unemployment rate to rise to the low 4.0%s, compared to 3.5 percent currently," he said.

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