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"We will get a major recession," Deutsche Bank economists wrote in a report to clients on Tuesday. and why is it important?
Is the US economy heading for another recession?
Will it be worse than the last time?
Well, you might be witnessing these types of headlines all over the web, and this is all because US GDP fell by 1.4% by last quarter, stocks are dropping down, and Federal Reserve gears up to raise interest rates.
This information clearly shows that the U.S. economic recession is coming again in the year 2022. Economists believe that the US financial crisis has been spreading worldwide. They predict that the US economy will welcome a recession for the second time after almost ten years of recovery from the 2008 financial crisis.
But what is a Recession? And How can it affect your life? Is it something that you should be worried about? Not many people have a clear idea of what this word actually means.
In this article, we will explore these questions and hopefully provide some answers.
What does a recession mean?
According to google dictionary, a recession is a period of decreased economic activity. More broadly, it can mean a reduction in economic output and employment. A recession is usually measured by calculating GDP growth and comparing it with previous economic periods.
In short, A recession is defined as two consecutive quarters of negative growth. The first quarter of 2019 is expected to be positive, but the second quarter may see some contraction.
The last time the US experienced a recession was during the financial crisis in 2008-2009 when GDP declined by 1.2% and unemployment rose from 5% to 10%.
What are the signs that we are in a recession?
The biggest sign would be if companies start to cut staff. If this happens en masse, it could signal that companies are worried about the future prospects for their business. This happened at the start of 2008 when Lehman Brothers collapsed and many other financial institutions were forced to lay off staff. Other signs include:
Consumers starting to save more and spend less on non-essential items (such as holidays, new clothes, etc).
The housing market slowing down or falling into depression as fewer people buy homes or rental properties.
In a nutshell, if you're looking for signs of a recession then you should be on the lookout for:
-A decline in GDP growth for two consecutive quarters
-A fall in industrial production
-An increase in the unemployment rate
What Happens during a recession?
The National Bureau of Economic Research (NBER), a private research organization, determines when recessions begin and end. The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP growth, real income growth, and employment."
A recession can be caused by many factors — such as rising interest rates or an increase in oil prices.
Economists generally agree that recessions are started by shocks to the economy that cause demand to fall below supply levels. For example, if an oil crisis occurs, consumers will spend less money because they will be afraid that gasoline prices will continue to increase. Businesses may also reduce production if they expect consumers will buy fewer goods in the future.
When this happens, companies start laying off workers because they don't need as many people to produce their goods. When companies lay off workers, those people have less money to spend on items like cars and clothes — so other businesses start laying off workers too! Soon everyone is out of work and there's no one left to buy anything at all! This causes prices
Is the recession coming again in the US this year?
Economist Robert Shiller, who predicted the 2008 financial crisis and the dot-com bubble, says we're headed for another recession.
Shiller told CNBC that he sees signs of a slowdown in the economy and that he expects to see a recession by 2020 or 2021. He said that President Donald Trump's trade wars with China, Europe, and other countries have been destabilizing the markets.
He said: "It will be a long time before we get back to where we were before this happened."
Shiller also said that he expects stocks to continue to fall over the next few months. The S&P 500 index already dropped below its 200-day moving average on Friday, which was considered a bearish sign by many analysts and traders.
According to the Wall Street Journal, another economist Joe Brusuelas, chief economist at RSM US LLP. says “Risk of a recession is rising due to the series of supply shocks cascading throughout the economy as the Fed lifts rates to address inflation.”
So, What do you think? Is the recession coming again in the US this year?
Well, the answer is still uncertain.
But! The Federal Reserve has said it will raise interest rates to keep inflation under control.
However, if there is a slowdown in China or Europe, it could have an impact on the US economy.