“We must have an objective definition”
Officially the NBER you set the recession As in “a significant reduction in economic activity that is widespread throughout the economy and lasts for more than a few months.” In fact, the latest quarterly gross domestic product report, which tracks the overall health of the economy second consecutive contraction this year.
Still, if the NBER ultimately declares a recession, it could be months away, and it will take into account other considerations, such as employment and personal income.
The main thing is that their salaries are not enough.
Thomas Phillipson
Former acting chairman of the White House Council of Economic Advisers
This puts the country in a gray area, Philipson said.
“Why let an academic group decide?” I said, “We should have an objective definition, not the opinion of a scientific committee.”
Consumers are acting like we’re in a recession
For now, consumers should be the focus energy price shocks and general inflation, Philipson added. “It affects everyday Americans.”
For this purpose, Federal Reserve he is moving aggressively to calm rising inflation, but “it will take some time to work its way through,” he said.
“Powell is raising the federal funds rate, and he’s leaving himself open to raising it again in September,” said Diana Furchtgott-Roth, an economics professor at George Washington University and former chief economist at the Labor Department. “He says everything right.”
However, consumers are “paying more for gas and food, so they have to cut back on other expenses,” Furchtgott-Roth said.
“The negative news continues to mount,” he said. “We are definitely in a recession.”
What’s Next: ‘Road to Soft Landing’
According to both experts, the direction of the labor market will be the basis for determining the future state of the economy.
Philipson noted that the reduction of consumption is in the first place. “If businesses can’t sell as much as they used to because consumers aren’t buying as much, then they lay off workers.”
According to Furchtgott-Roth, “we have twice as many jobs as unemployed, so employers won’t be as quick to fire people.”
“It’s way to soft landing,” he said.
3 ways to prepare your finances for a recession
While the effects of record inflation will be felt across the board, each family will experience a different degree of setback depending on their income, savings and job security.
Still, there are a few ways to prepare For recessions that are universal, according to Larry Harris, Fred W. Keenan Chair of Finance at the University of Southern California’s Marshall School of Business and former chief economist at the Securities and Exchange Commission.
Here’s his advice:
- Simplify your expenses. “If they expect to have to make layoffs, the sooner they do it, the better,” Harris said. This may mean cutting back on a few expenses that you just want and don’t really need, like the subscription services you signed up for during the Covid pandemic. If you don’t use it, lose it.
- Avoid variable rate debt. should be credit cards has a floating annual interest rate, meaning there is a direct link to the Fed’s benchmark, so anyone with a balance will see their interest payments increase with every move the Fed makes. Homeowners with adjustable rate mortgages or home equity lines of creditAttached to the main rate will also be affected.
This makes it a particularly good time to identify your outstanding loans and see if there are any refinancing do without “If there’s an opportunity to refinance to a fixed rate, do it now before rates go higher,” Harris said.
- Consider stashing extra cash in Series I bonds. Backed by the federal government, these inflation-protected assets are virtually risk-free and Pay at 9.62% p.a. until OctoberIt is the highest productivity on record.
Even though there are purchase restrictions and you can’t touch the money for at least a year, you’ll get a better return than a savings account or a one-year certificate of savings that pays less than 2%. (Rates on online savings accounts, money market accounts and certificates of deposit are poised to go up, but it will be a while. these returns are competitive with inflation.)
