Quick Finance Piece: Is this a recession?

Yes, it is.

So before I go too far let me do the normal disclaimer. I am a finance professional and any advice you see on my blog is my own opinion only and is not meant as investment advice. So that out of the way, yes we are in a recession. “But the media says we aren’t in a REAL recession”. I don’t trust the media, if you do I can’t really help you….

An economic recession has been defined for decades as two quarters of economic decline as measured by GDP. Now that’s not the technical definition but that is what has been used as the gauge for many years. The United States is in a recession. Now there are DEGREE’S of recession and that is where the nuance comes in.

This is not a hard recession by any means. We have great job numbers (which is an interesting situation in of itself), but we have horrible inflation, a slowing housing market etc. You see what you aren’t hearing much about is the horrific impact that Covid shut downs had on industries and supply and demand economics. You shut down global production for 6 months, you just don’t flip a switch and it comes back to normal.

The ride shouldn’t be to bumpy this time around

Throw in a war, a decrease in domestic Oil refining, divisive politics, on and on. The situation is dynamic and fluid there is no one catch all correction to fix this. You had decades of artificially low interest rates now creeping up again. A hard recession would see the market decreasing, layoff’s and a higher unemployment rate.

Companies are reporting good earnings that means DEMAND is still there and that bodes well for a quick recovery. They call that a V shaped recovery. I suspect we will see another decline in the 3rd qtr. and possibly into the 4th but the basis for good economic outcomes are there. First, the job market is healthy, you can work and make money. Second, demand for goods and services is still robust, so companies are still making profit (which fuels point 1).

I think 2023 will be a better year economically, unless again something extraordinary happens (a pandemic, another war. Be prudent here and tighten things up as best you can and save a bit more than usual but I don’t suspect things to get horrible soon, but things will still remain in the current state for the near term.

Thanks for coming by and supporting my blog I really appreciate it. Want to see another post like this one? Click here.

8 weeks later In the U.S.

85,000 people (rounded) have died and 36 million (rounded) have lost their jobs. We can get into a debate on is one death to many? Is 36 million jobs loss worth the shut down? I’d rather not to be honest. Opinions are like yesterday’s everyone has them. If you are a “keep it locked down” or a “open the country now” person I respect your point of view. The point of this post is to illustrate how fast things go in the crapper.

This doesn’t even begin to scratch the surface globally, the numbers above are U.S. only. The kicker here is many people want and expect the government to keep people afloat through the crisis. The problem with that is we have been running a deficit for decades and decades. So it’s literally going to come down to printing more money. When that happens money becomes worth less and less and we get into the horrible situation of where it costs more to buy less. History is full of situations like this, government bail outs, on the short term are effective but we are now looking at a 3 trillion “round two” stimulus…

That money will have to be printed, with 36 million out of work taxes will be way down. This is all taking a huge toll on people. Depression is up, mental illness is up its getting worse and worse. I found an article here that talks about the current working environment and how its impacting people.

From the article: “The staggering high unemployment and coronavirus recession are factors, but they aren’t the only factors contributing to the heightened mental health struggles and depression—feelings of hopelessness, emptiness, loss of energy, trouble sleeping, etc. Even those who remain employed are struggling. The unemployed are stressed and anxious about their future employment prospects and current and future financial circumstances. While the employed aren’t so sure they stand on solid ground either.”

Everyone is feeling this, there is no escape. If you are fortunate to still be able to work, or your job is coming back soon this is an extremely tenuous time. Everyone is on edge and companies are hemorrhaging money. Income is the most important factor in your financial health, and thus is important to your mental health.

Hang in there! Things are not great right now but they will improve. You should plan for an extended down turn in the job market. While things will likely improve mid-June – July it’s not likely we will get back to the prior economic highs we saw before corona. Holding on to your job is very important right now, the government will help you in the short term but long term federal and state aid will dry up.

It’s been a tough couple of months. I suspect we will still be on a rollercoaster ride through May. By July 4th we should see our new normal, most of us will be back to work in a semi normal state. Remember that your income is paramount, save what you can and take care of your needs first, help others second.

You are doing great, one day at a time.