Is The USA Headed towards a Recession?

When the gross value of products and services offered by a nation increases year by year it’s indicative of a growing economy – we know this phenomenon as GDP. If a country’s GDP decreases for 2-3 quarters consecutively, it is called a recession – the GDP fails to compete with inflation, there’s a lack of demand, and businesses are forced to make layoffs. 

The GDP of the USA has declined for two consecutive quarters in 2022. It fell by 1.6% in the first quarter and by 0.6% in the second quarter. However, the National Bureau of Economic Research has not declared a recession. The recession in the US is called by a group of eight economists elected by the NBER. It is called the Business Cycle Dating Committee and they are silent so far.

The public has a different opinion on the matter. 3 out of 5 US citizens think that the country is in recession. They are trying various ways to fight inflation and save money – travelling less to save fuel money, for instance. The housing market has seen a serious dip and the stock indexes have been declining steadily throughout the year.

The Federal Reserve has already increased the interest rates on short-term loans in the hopes that with higher interest rates people will borrow less, spend less, and save more money. It will also likely decrease the demand for consumer items thus decreasing the prices. The policy has seen little and slow success. 

While fuel prices have declined a little, prices of food items are still on the rise. At this juncture, if the central bank keeps increasing interest rates to curb inflation it will put both individuals and businesses in a very tight spot. It is likely to result in layoffs and joblessness, and eventually cause the dreaded recession. 

Some experts like economist Nouriel Roubini are predicting a “long and ugly” recession while some others are more optimistic and expect a soft landing – an economic slowdown instead of a full-blown recession after all American businesses have added more than 315,000 workers in the month of August, which is no sign of an economy that’s about to collapse.