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We do not get out of inflation when there is an air of fear of a recession in the United States. Since the beginning of the year there has been a lot of talk about it. We are two months away from the end of this 2022 and the issue is still present. Which leads us to ask ourselves, then, what are the clear signs that we are in a recession or that we are not?
Signs we are in a recession
Layoffs and hiring freezes : One of the primary characteristics of a recession is unemployment. In recent weeks, many large companies have announced plans to freeze their hiring for this holiday season and also a series of layoffs . Meta leads this list with an announcement of 11,000 workers who will soon have to leave the company. But Zuckerberg’s company is not the only one, more and more companies are joining the blacklist.
Gas prices rise – According to data from the US Energy Information Administration (EIA), the average price of gasoline in April 2021 was $2,958. A year later, it skyrocketed to $4,213 a gallon. And then the price topped $5 a gallon in June . Although gasoline prices have fallen since then, there are specialists who suggest that they will increase in the coming weeks.
Real estate market freeze : Real estate had a surprise boom during the pandemic; this year, home prices hit record highs and mortgage rates are on the rise. Pending home sales fell 20% in June compared to last year, which also hit its lowest level in two years.
Signs we are not in a recession
GDP fell, but nothing serious : GDP contracted a very small amount in the first two quarters of the year: 1.6% in the first quarter and 0.9% in the second quarter. The reality is that these numbers are not significant enough to say that we are in a recession.
US Consumer Spending Is Strong – Both Chase Bank and Bank of America released data points last week indicating continued strong consumer spending through the summer months . Chase Bank CEO Jamie Dimon shared that his customers overall spent 10% more in 2022 compared to 2021. Similarly, Bank of America CEO Brian Moynihan shared that his customers remained resilient. with an 11% increase in June 2022 compared to 2021 noting that this trend continued through July.
The Labor Market Is Strong – Despite negative company trends on layoffs and hiring freezes, as of this writing, the labor market remains strong. The unemployment rate of 3.6% is the lowest in years . In recent months, the US has been increasing employment by 400,000 a month.