Is The U.S In A Recession Or Not? Here’s The Best Answer

The best answer to the question of whether or not the US is in a recession is that economists still don't know.

By Charlene Badasie | Published

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As higher borrowing costs aimed at tackling inflation causes the economy to contract, people across America are bracing themselves for a recession. Although all the signs are there, experts aren’t sure if there will be one at all. Right now, nothing is really going according to plan and the available data reveals contradicting stories.

The most important figures are job and unemployment numbers, grocery prices, debt, credit, and Gross Domestic Product. Some of this information points squarely at a recession, while others suggest a soft landing scenario. And economists remain divided over where we should be looking for answers. “We don’t quite know what’s going on,” Economist Raguhram Rajan told NPR.

Rajan, who also works as a Professor of Finance at the University of Chicago’s Booth School of Business, described the recession situation as relatively unprecedented. Inflation is at the root of the confusion as the Federal Reserve took action to bring prices down by raising interest rates in 2022. The move aims to slow spending as higher interests increase the lending rate.

 As a result, people and businesses will borrow money, spend less and ultimately buy less. When spending slows, businesses lower prices to entice people to buy stuff. And, just like that, prices fall and the inflation problem is solved. The only problem is that decreased spending causes the entire economy to slow down. But will it slow just enough or will everything come to a screeching recession-type halt?

Perhaps the United States is already in a recession? Speaking to NPR, Chief Economist at The Conference Board, Dana Peterson says she sees already recession in the data. “Our leading economic indicators suggest that it’s happening right now,” she told the publication. She made the revelation after examining housing permits, consumer confidence, manufacturing data, and more.

Peterson also points to thousands of layoffs the country has experienced in the last year. The rising price of essentials like food, electricity, and gas are also clear signs of a recession. Fortunately, Peterson predicts it will be a mild one. That’s because, amid job cuts, aren’t planning to lay people off like they might in a typical recession.

However, according to other experts, there may not be a recession at all. Economist at the University of Michigan Justin Wolfers says the concept is completely absurd. He predicts that America will experience a soft landing. Demand might decrease a little. But it will be just enough to get companies to lower prices and bring down inflation.

But there won’t be any significant damage to the entire United States economy. Like Peterson, his recession optimism stems from employment trends. “Right now we’re celebrating unemployment being at a 50-year low. These are levels that earlier generations of economists had said was impossible,” he explained via NPR.

The economy is in a strange place, with polarizing data. “The economics we learn in school is neat and clean,” says Dana Peterson added. “It doesn’t assume that you have shocks or labor shortages. Those are weird things that economic models can’t always handle.” So for now the country’s recession status remains unknown.