We Are Not in a Recession

Economic wins in August have boosted confidence among analysts, following two quarters of negative growth. Still, recession fears loom for now.

The economy added 528,000 jobs just in July and the unemployment rate fell to 3.5%, the lowest it has been since 1969. Gas prices found their way back to under $4 per gallon, the stock market enjoyed its longest winning streak since November 2021, and inflation appears to have simmered down.

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“This is not a recession. It’s not even in the same universe as a recession,” Mark Zandi, Chief Economist at Moody’s Analytics, told CNN. “It’s just patently wrong to say it is.”

However, some experts still think that in 2023 and 2024, as the economy absorbs the effects of the Federal Reserve’s interest rate hikes, we may be in for a downturn. As evidence, they point to the currently inverted yield curve (the gap between 2-year and 10-year Treasury yields). An inverted yield curve has occurred before every recession since 1955.

But for now, there is a feeling that inflation has peaked, which makes people optimistic. In addition to gasoline, diesel and jet fuel prices have fallen, lowering July’s inflation metrics. And while consumer prices are still 8.5% higher than they were last year, the rate is down from June’s 40-year record high of 9.1%.

Also, wholesale inflation, measured by the producer price index (the prices paid to producers for their goods and services), may have peaked. It decelerated in July more quickly than expected and declined month over month for the first time since the pandemic shutdown of April 2020.

These inflation reports point to easing energy prices and supply chain snags. But Americans still face a cost of living that is too high, and when wages are adjusted for inflation, they are not enough. The University of Michigan’s measure of consumer sentiment ticked up for two months straight, though its levels are still low.

Compared to real recessionary conditions—millions of jobs lost, home foreclosures, business closings—today’s economy is experiencing something different, whatever you want to call it.