Is the economic system in recession? Spectacular economists

“We should have an objective definition”

Officially the NBER defines a recession as “a significant downturn in economic activity that spreads 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, showed a second contraction in a row This year.

Still, if the NBER does end up declaring a recession, it could be months away, and it will also factor in other factors such as employment and personal income.

What really matters is that their salaries don’t go that far.

Tom Philipson

former chairman of the White House Council of Economic Advisers

That puts the country in a gray area, Philipson said.

“Why are we letting an academic group decide?” He said. “We should have an objective definition, not the opinion of an academic committee.”

Consumers are acting like we’re in a recession

At this point, users should focus on energy price shocks and general inflationPhilipson added. “It affects everyday Americans.”

To that end, Federal Reserve is taking aggressive steps to moderate soaring inflation, but “it will take some time to show,” he said.

“Powell is raising the federal funds rate and 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 he needs to.

But consumers are “paying more for gas and food, so they have to cut back on other expenses,” Furchtgott-Roth said.

“There is more and more negative news,” she added. “We are definitely in a recession.”

What’s Next: Road to a Soft Landing

Both experts said that the direction of the labor market will be the main condition of the future economy.

Philipson noted that the reduction in consumption is the first. “If companies 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 job vacancies as unemployed, so employers will not rush to lay people off.”

“It’s a path to a soft landing,” she said.

3 Ways to Prepare Your Finances for a Recession

While the impact of record inflation is being felt around the world, each household will experience the pullback differently, depending on their income, savings and job security.

There are a few though methods of preparation 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 of the Securities and Exchange Commission, a recession that is universal.

Here’s his advice:

  1. Simplify your spending. “If they expect to be forced to reduce their numbers, the sooner they do it, the better off they will be,” Harris said. This may mean cutting back on a few expenses now that you just want and don’t really need, such as the subscription services you signed up for during the Covid pandemic. If you don’t use it, lose it.
  2. Avoid variable rate debt. The majority credit cards has a variable annual percentage rate, which means there is a direct correlation to the Fed’s benchmark, so anyone with a balance will see their interest charges jump with every move the Fed makes. Homeowners with an adjustable-rate mortgage or home equity lines of creditwhich are linked to the prime rate will also be affected.

    This is a particularly good time to identify outstanding loans and find out if refinancing logical. “If there’s an option to refinance to a fixed rate, do it now before rates go up,” Harris said.

  3. Consider putting extra money in Series I bonds. This inflation-protected asset, backed by the federal government, is virtually risk-free and to pay an annual rate of 9.62% until Octoberthe largest crop on record.

    Although there are purchase limits and you can’t get the money for at least a year, you’ll get a much better return than a savings account or a one-year certificate of deposit that pays less than 2%. (Interest rates on online savings accounts, money market accounts, and certificates of deposit may increase, but it will take some time those returns are competitive with inflation.)

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