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A worker helps to erect a building in Philadelphia. A slowdown in home sales is expected this year as increased borrowing costs reduce would-be buyers’ purchasing power. —AP Photos/Matt Rourke
The economy added 500,000 jobs last month. “Even in good times that is a very, very high number,” one expert says.
Construction workers build new homes in Philadelphia in April. A slowdown in home sales is expected this year as the increased borrowing costs reduce would-be buyers’ purchasing power. —AP Photo/Matt Rourke
Many companies are struggling to find qualified workers. —AP Photo/Tony Dejak
A worker helps to erect a building in Philadelphia. A slowdown in home sales is expected this year as increased borrowing costs reduce would-be buyers’ purchasing power. —AP Photos/Matt Rourke
The economy added 500,000 jobs last month. “Even in good times that is a very, very high number,” one expert says.
Construction workers build new homes in Philadelphia in April. A slowdown in home sales is expected this year as the increased borrowing costs reduce would-be buyers’ purchasing power. —AP Photo/Matt Rourke
Many companies are struggling to find qualified workers. —AP Photo/Tony Dejak
The late U.S. President Harry S. Truman famously said: “It’s a recession when your neighbor loses his job; it’s a depression when you lose yours.”
The statement is a strong lesson in perspective. As the Boy Scout motto says: “Be prepared!”
A survey by Empower Institute’s Wealth & Wellness Mid-Year Survey reported in August, 73% of U.S. consumers are concerned about a recession. The survey also indicated that 86% have taken steps to prepare for an economic downturn like defer a major purchase, add more to their savings or paying off debt. Based in Colorado, Empower manages $1.2 trillion for thousands of individuals and groups.
Experts say these are all good ideas.
To be sure, there has been much talk about recession as inflation has reached historic highs. But experts say it is the result of many factors, such transportation and warehouse worker shortages brought on by the pandemic, which caused worldwide supply chain issues and the Russian invasion of Ukraine, and the subsequent six months of war.
Ukraine is a major producer of grain and Russia is one of the world’s top producers of oil and natural gas.
Those factors drove up prices on food, gasoline and many other products.
An imperfect rule of thumb on when the economy is in a recession is two consecutive quarters of negative gross domestic product (GDP), said Ivan Smith, managing partner of Coral Island Investments in Philadelphia.
That was the case in the first and second quarters of 2022, which ended June 30. GDP is the total sum of all U.S. goods and services.
But economists consider a number of economic indicators, such as the employment rate, industrial production, personal consumption, wholesale-retail sales, the stock market and other factors.
On June 30, two of the most popular stock indexes dropped.
For example, the Standard and Poor’s 500 ended the first half of the year down by 20.6%. The Dow Jones Industrial Average was down by about 15%, for the first half of 2022.
But there was good news, as well.
“The job market clocked 500,000 jobs last month,” said Joshua Mask, economics professor at Temple University. “Even in good times that is a very, very high number. It would be very surprising if right now we were in a recession.”
On Aug. 16, Mark Zandi, chief economist at Moody’s Analytics, said: “Recent U.S. job and inflation numbers have been especially encouraging. While recession risks remain high — odds are about even through 2023 — the most likely outlook remains that the economy will avoid a downtown.”
As of July 30, inflation as measured by the consumer price index was 8.5%, down from 9.1% a month earlier, according to the U.S. Bureau of Labor Statistics.
According to the AAA Mid Atlantic Weekly Survey of gas prices, in Philadelphia, the average price for regular gasoline was $4.30 a gallon, down from $4.66 a month earlier.
Nationally, prices on regular gas dropped to $3.93 a gallon this week, down from $4.53 a month ago, according to the AAA survey.
The group that officially declares a recession, usually much later after it has happened is the National Bureau of Economic Research, a non-profit firm based in Massachusetts, describes a recession as a significant decline in economic activity that is spread across the economy and many industries.
But Mask, the Temple economic professor, used a football analogy to explain it better:
“A football is player running down towards the end zone. You are taking hits and occasionally you might even fall down,” Mask said. “But you’re still moving towards that end zone. But a change in direction only happens if you get tackled, fumbled or there is an interception. Then there is a genuine change of direction. It’s the same thing with the economy. There has to be a genuine change in direction.”
Nevertheless, perspective is important, as per Truman.
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