The U.S. might fall prey to recession in the near future, but it isn’t entering one now and any such talk of a shrinking economy would be “fake,” in the words of one analyst.
Worries about recession have exploded in the past several months as inflation kept rising and the Federal Reserve adopted a more aggressive strategy to increase interest rates. One poll shows more than half of the public thinks the U.S. is already in recession.
That’s not a big surprise. Rising rates tend to slow the economy — or worse.
The past 10 U.S. recessions, for example, have taken place during or right after a recent Fed cycle of raising rates, according to research by Jefferies LLC.
Adding tinder to the fire, the U.S. economy contracted in the first quarter for the first time since the onset of the pandemic. Additionally, gross domestic product, the official scorecard for the economy, could shrink again in the second quarter.
Rarely has GDP shrunk for two quarters in a row without a recession being declared. The only time in U.S. history that happened was in 1947.
Yet an economy is far more complex than just headline GDP, analysts caution.
The group of prestigious economists responsible for declaring official recessions takes into account six major factors, such as the health of the labor market as well as household income and spending.
By those measures, the U.S. is definitely not in a recession. Far from it.