As Americans see higher inflation rates, pay more for gas, and buy less groceries for the same amount, they’re wondering if the economy is headed for a crash or recession.
Often times when a recession hits there are signs that it’s coming.
This leads Americans to ask the question, are we heading into a recession?
How to tell if America has already entered a recession
According to WHEC News, the economy has contracted for two consecutive quarters, leading people to fear that we’re right at the start of a recession.
The unwritten rule for being able to tell if we’re in a recession is six straight months of contraction.
The circumstances are different this time due to the pandemic and millions of Americans not working.
Despite this factor, the job market has remained strong, which normally doesn’t during a recession.
At one point there were so many unfilled jobs that there were two for every one American.
In all, 2.7 million jobs were added.
Economists are quick to say they do not think we are in, or are headed for, a recession.
It’s believed an economic downturn will happen later in 2022 or in 2023.
Who is in charge of deciding whether a recession is actually happening?
The National Bureau of Economic Research decides if and when a recession occurs.
The Business Cycle Dating Committee works under the NBER, and they have a specific definition for a recession.
A recession is a “significant decline in economic activity that is spread across the economy and lasts for longer than a few months.”
This means everything needs to be weak including income, employment, inflation rates, and spending for both retail along with supply and demand.
At the moment, that isn’t the case for employment, yet inflation is becoming unbearable.
Even Walmart reports consumers are spending much less due to higher costs in gas and food.
This causes consumers to buy less things like clothing, and a downturn for economic spending looks like a clear indicator for a recession.
Here are 9 key factors that show if the economy is heading into a recession
According to Insider, there are nine major factors that can help determine if we’re heading into a recession.
One is when job openings are falling.
There are still millions of job openings for Americans to gain employment, but that rate has dropped significantly in the last three months.
This shows that less jobs are a result of businesses cutting back on spending.
Another sign is that corporate sentiment is dropping rapidly.
The same thing happened during the last two recessions as well.
This means earnings are dropping as well, another sign.
Now, Wall Street strategists are simply expecting the drops, and pricing accordingly.
The yield curve being inverted is a sign, and it means the yields on bonds increase when the demand drops.
This has happened before every recession since the 1950s.
One of the biggest signs is that consumers are only spending money on what they really need, not what they want.
A large percentage of Americans have admitted that they’re struggling to pay for their required expenses, making it harder for them to spend money anywhere else.
Now, companies are starting to warn that demand is going to drop at the same level they have before recessions in the past.
As this happens, companies are also warning their employees of the potential for layoffs.
Finally, one of the biggest signs is that consumer sentiment is at an all time low.
Despite all of the indicators of a recession, the U.S. has added 528,000 jobs to the job market
Now, the rate of unemployment has fallen to just 3.5%.
This has restored all positions lost during the COVID-19 pandemic, according to WHEC News.
In July there were 130,000 more jobs added than in June, which is the highest amount since February of this year.
This is an incredibly strong report for the job market and relatively surprising as Americans fear that we’re headed for a recession.
Biden has stated the positive labor market is a result of his economic plan.
He also makes it clear he does not believe America is headed for a recession.
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Samantha edits our personal finance and consumer news section. Have a question or lead? Send it to [email protected].