What the title says.
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So Imagine you have a toy car. Sometimes, the car goes fast, and sometimes it goes slow. Similarly, the economy, which is like a big machine that makes money for everyone, also goes through ups and downs.
Right now, the unemployment rate tells us how many people don’t have jobs. If it’s low, like 3.6 or 0.9 percent, it means most people have jobs, and that’s a good thing.
But there are other things that experts look at to understand how the economy is doing. They look at how much money people are spending, how much businesses are investing, and how happy people feel about the economy.
Sometimes, even when most people have jobs, the economy can still start to slow down. It’s like the car is going slower, even though it was going fast before. Experts use different signs to figure out if this might happen.
They look at all the information and try to predict if the economy might get worse in the future. They call this a “recession.” It’s like when the car is going really slow or even stops for a while.
So, even if unemployment is low, experts are saying there might be a recession because they see other signs that the economy could slow down. It’s like they see the car might slow down, even though it was going fast before. They want to let people know so that they can prepare and be ready for any changes that might happen.
Just because unemployment is low doesn’t mean there isn’t a recession coming. Recession is more to do with a decline in GDP. You can have an unemployment rate of 0% but still have declining GDP which means recession.
Someone is ALWAYS predicting a recession. This is important. No matter what, someone will always be predicting it.
Economists, and pundits generally don’t make headlines or news or anything when they are predicting things like slight ups and downs, or good times ahead or such. This isn’t interesting. People generally don’t take note of that, because there isn’t anything to do with that info other than keep going.
But predicting a decline is alarming! You could lose everything. In economics and finance, generally you don’t really care about good times any much as near as bad times. In good times you can make money, but in bad times, thats horrible because you could lose it all! Nothing is more frightening or important than that. Making money is cool, but look, you’re fine, but losing it will be the worst thing ever.
In much of this reporting and sentiment as you can see generally focuses on what to do in BAD times, less so thatn what to do in good times. In good times things are normal, but avoiding and predicting bad times makes news because its more impactful
None of this means a recession is coming, it only means that its generally far more interesting to talk of potential disaster than like, minor wins or losses, so voices that talk about it get more play
**tl;dr**: Bad times are much more impactful than good times, so the conversation is rarely tilted towards good and people predicting bad times get a lot of attention, no matter if they are right or wrong
The economy goes up and down. So being up now doesn’t mean you will never go down again.
The economy, especially when it comes to jobs, has been doing well. But maybe too well – growing really fast, as happened when the economy began recovering from the pandemic shock, brought inflation because everyone was suddenly competing for resources whose producers hadn’t caught up yet. Most notably, the “supply chain” – the system that gets things moved where they need to go to make more things, which are then moved again, etc. – was cut way back during the pandemic, so getting supplies again started costing more and more when the economy suddenly snapped back. Inflation is harmful, so the Federal Reserve (“the Fed”), which controls how much money moves around, tried to control it by making it more expensive to borrow money so people would cool down their economic activity. But that can in turn cool things down too much and cause a recession. The Fed tries to do what’s called a “soft landing” and control inflation without going so far as to cause a recession, but that’s hard to do because you can’t know exactly what’s going to happen in advance.
Because [household saving rates are way down](https://www.msn.com/en-us/money/markets/household-savings-collapse-sparks-recession-fears-among-economists/ar-AA1dnjRx).
Because [short-term bonds are paying higher interest rates than long-term bonds](https://www.cnbc.com/2023/07/07/yield-curve-inverted-the-lowest-since-1981-what-it-means-for-yo.html).
Because the amount of US money in circulation is contracting. [This hasn’t happened since the Great Depression.](https://www.msn.com/en-us/money/markets/us-money-supply-is-doing-something-not-seen-since-the-great-depression-and-it-may-signal-a-big-move-to-come-for-stocks/ar-AA1djNEZ)
That’s just off the top of my head, and I’m not even an armchair economist.
If certain people want a recession, they will make it happen, regardless of economic indicators. In the economic environment we live in, it provides those with the most means to acquire more. This is not conspiratorial at all because monetary America proves time and time again that all things are permissible to ensure those who have the least get what they have taken away. There is no cultural unity to America at all. What matters is the acquisition of wealth but portraying that it is a benefit to many; to use as many resources as possible regardless of any future outcomes.
The idea of recession is popularized and denominated with parameters. Talking about it more gives people more reason to be anxious rather than carrying on. Why, because growth is fucking super essential to monetary America rather than consuming only what is needed. The desire to slow down the velocity of money is done at very high levels and anxiety in the large population makes happen.
“They” have been saying a recession is coming for more than a year now. I’m not saying “they” are wrong. One is coming.
The question is “when”. And “they” have been all wrong about “when”.
The generally accepted definition of a recession is two consecutive quarters of GDP decline. Normally declining GDP and increasing Unemployment go hand and hand. Neither situation is the case now and nobody is claiming we are in a Recession. The first two two quarters of 2022 were both marked by a declining GDP and A decreasing unemployment rate (and a historically low unemployment rate). This anomaly was attributed to some distortions caused by the pandemic and the fact that a relatively large cohort of boomers were reading the workforce while a smaller cohort of young workers were entering the workforce. The later situation will continue for the foreseeable future. Ironically, the effects of the declining birth rate could result in both a stagnant economy and a labor shortage. Future recessions may look and feel different than they have in the past.
Low unemployment is actually a leading indicator of recessions – i.e. whenever you see a persistently low unemployment, you’re likely to get a recession soon.
So in a perverted way, very low unemployment is potentially BAD for the economy. This is how it all snowballs:
**Step 1:**
Almost everyone is employed => people have money => people spend more.
When people spend a lot more than normal (because a lot more of them are employed) to then prices of things go up (e.g., people are willing to spend more for the same house pushing its price up). In this way, inflation rises.
**Step 2:**
Inflation rising is not good and eventually the Fed takes action. The Federal reserve tightens the money strings by raising interest rates. This raise typically means that both people and companies start spending LESS now… Because loans get expensive.
Take this far enough and it crashes the economy as everyone reduces spending. Less spending => slower or negative economic growth.
So in a weird way, low unemployment portends all these follow-on effects, and therefore predicts an upcoming recession.
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