Debate on the Recession is shifting to a question of when and not if

Debate on the Recession is shifting to a question of when and not if ...

Despite a heated political debate that has enraged Elon Musk, economists, the Federal Reserve, and Wall Street have unanimously agreed that current economic data does not indicate that the US is in a recession.

The future isn't quite as clear.

Even though GDP has declined for two consecutive quarters, including a 0.9 percent decline for the second quarter, the Atlanta Federal Reserve is now estimating that GDP will increase by 1.2 percent in the third quarter.

The Atlanta Fed's president, Raphael Bostic, said the country is a long way from a recession and that recession worries may become self-fulfilling.

On Friday, Bostic told National Public Radio that job growth is encouraging and demonstrates economic momentum. There's a lot of demand out there, and so I'm confident that we're not headed for a recession.

Following the central bank's hike of interest rates on July 28, his sentiment mirrors those of Fed Chairman Jerome Powell.

Were not attempting to have a recession, and we do not believe we should as part of an effort to reduce inflation, said the speaker. The reason for this is that there are just too many areas of the economy that aren't doing well, you know.

GDP isn't just a economic indicator.

According to him, using GDP as a benchmark to assess whether an economy has fallen into a recession is no longer the end all.

Even when quarterly GDP readings were in the minus column, there has been an apparent disconnect between the current job market status coupled with the unemployment rate of 3.6 percent.

Despite employment improvements that have been impressive year-to-date, they are trending down even as new claims for unemployment benefits are on a downward trajectory, according to the researcher.

While GDP was expected to improve in the third and fourth quarters, it is widely acknowledged that threats for the US economy have increased and are high, Hamricksaid. The most recent Bankrate quarterly survey of economists predicted the likelihood of recession at about 1-in-2 through the end of 2023.

The stock market has become enamored with the notion that the Fed would eventually raise rates and lower rates early next year.

Wall Street Says the Economy Isn't in a Recession

Because of booming employment, strong gross domestic income, and strong final sales, Bank of America believes the current economy is merely a distraction.

JPMorgan Chase echoed a similar viewpoint, saying, "We do not believe the United States fell into recession earlier this year... because of the increase in nonfarm employment in the second quarter."

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Given the recent substantial increase in employmentless claims, the investment bank expressed concern about unemployment. It said that if the unemployment rate rises to an average 275,000 this quarter, it would send a strong signal that the United States is in a recession.

Anthony Chan, a former economist at J.P. Morgan Chase, believes the US economy is not in a recession in the third quarter.

The United States generally enters a recession when employment growth is usually 2.0 percent or less on a monthly percentage basis, according to the author.

Both the Establishment Survey and the Household Survey show yearly growth of more than 4%.

Chan said this does not suggest the US is in a state of flux or is in a recession at the moment.

According to the author, Wall Street and investors should be prepared for sluggish economic growth and firm earnings, as well as a 65% probability of a mild recession in the next 12 months.

For the time being, the economic backdrop does not support the view that we are currently in a recession, according to the author.

Gregory Daco, Ernst & Young's chief economist, says the ongoing, senseless, unhealthy recession obsession has been resolved.

The economy is evidentiably cooling, with GDP growth falling from 3.5 percent year-over-year in the first quarter to 1.5 percent year-over-year in the second quarter.

Higher inflation, a more hawkish Fed, tighter financial conditions, and a more threatening global economic backdrop will continue to impede on housing activity, consumer spending, and commerce, according to Daco.

The United States will enter a recession starting in the fall because, while GDP growth will improve in the third quarter and first quarter of 2023, it will decline in the fourth quarter and first quarter of 2023, according to the economist. The unemployment rate will climb and exceed 4% in early 2023.

Consumers are pinning their teeth.

Consumer confidence has sunk, even when expenditure has increased. The Michigan Consumer Sentiment Survey showed a modest increase in July, but the reading is at its lowest level ever.

Even if worries about global factors dipped, the one-year outlook fell to its lowest level since 2009. According to Joanne Hsu, the survey's director.

Consumer budgets are being sunk by rising food, gasoline, rent, mortgage, and credit card rates.

As a result of the recession, Americans' savings rates have dropped to 5.1 percent in June, from 5.5 percent in May, the lowest level since August 2009.

Consumers are still spending more even when inflation rates are at their highest level in over 40 years, according to Tim Quinlan, a senior economist at Wells Fargo Securities, in a July 29 research note.

Quinlan and Seery reported that the rise in spending is weighing heavily on consumers. They have not had to cut their savings rate this low since 2009.

Incomes aren't keeping pace with inflation rates, and households are spending more only because they aren't saving money.

Wells Fargo forecasts that a recession would begin at the beginning of next year.

Quinlan and Seery agree that the timing of the recession is dependent on a number of factors, but how the demand environment evolves is certainly an important factor. Consumer balance sheets are being deteriorated as a result of today's spending, and the longer it lasts, the more danger it presents to households.

Hamrick said the economy has yet to process or react to this years aggressive rate raising methods.

According to him, the only hope for the US economy would be true inflation relief. And the day of this salvation appears to be well-off in the future.

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