Recession - The unknown territory
“Recession is when a neighbor loses his job - Depression is when you lose yours”- Harry S. Truman
What is a recession? if there is two consecutive quarters of shrinking GDP. it can be considered as a recessions, it mean fewer jobs and lower wages.There is a possibility that consumers worrying about a possible recession could actually result into recession i.e. people spend less as they are uncertain about the future, then the GDP goes down.
Individuals are actively investing in the economy. The job market is active. The jobless rate is very manageable. This is not to say that life is perfect. There is a lot of inflation. It's not a recession, though.
The Federal Reserve is determined to reduce inflation. They require us to trade one set of problems for another, though, so that they can succeed. Reduce your spending to lower inflation. That, though, isn't your only option. Increases in the supply side of the economy, be they in the form of additional laborers to hire or additional goods to purchase, would also have the effect of lowering inflation. That's the best method, though it's riskier and outside the Fed's purview.
Inflation can be lowered with the help of reduced consumer expenditure. But the economy will enter a recession if consumers cut back too much on spending. This is a tricky balancing job because consumer purchasing is heavily influenced by the general public's fear of a recession.
The Fed chairman has made some very ominous public statements about recessions during the past year. Fed thinks these statements demonstrate an increasing awareness that scaring the public about a potential recession would be required to induce them to spend less.
The best-case scenario, of course, is to cause panic without really bringing about a recession. But human beings aren't stupid. Only acts that increase the likelihood of a recession will have the desired effect of frightening the public in response to the Fed's recession warnings.
Because of this, forecasting whether or not a recession would occur in the following months is completely futile. As a result of the Fed's efforts to combat inflation, the economy has been teetering on the edge of a recession, with many fearing that the country could soon collapse into a deep depression. However, there is an actual risk of falling off when you do it.
The best would be if inflation came down and it was not due to the Fed. The worst would be if it were all due to the Fed. And in between is some mix of the two. Regardless inflation’s coming down. Recession or not. Preferably not.