A recession in America by 2024 looks likely
economist.com
economist.com
The trick for both companies and individuals in down turns is adaptability. Some people will say "stay put!" other will say "find your next job quick before it's too late", but you can be sure of neither of these.
The only dangerous plan is to try to find stability in unstable times. This is a trap a lot of people fall into.
Make sure your resume is up to date, think about what's important to you, and keep any eye on where the world is evolving. A lot of career changes happen during down turns so don't expect to do what you're doing this year next year. This is more true the more severe the situation. The key to survival if it gets that bad is not hesitating to adapt and try something new, this is also the key to finding success in these times if you're looking for more than survival.
Of course, this may not be necessary if you have 3x your yearly expenses in investments you can cash out if needed, but better safe than sorry.
But in any event it might get worse before it gets better.
You mean Mar-Nov 2001?
That’s kind of my fear. Because while it was an extremely mild and short recession in aggregate terms, the recovery afterward had the worst distributional profile of any recovery in recent memory, seeing declines in the bottom three quintiles, the second-from-the-too quintile mostly flat, and almost all the gains concentrated in a very narrow slice at the top of the top quintile, which was a big reason for how bad the Great Recession was.
And there is a lot of indication that a 2024-ish recession could see a similar, or even worse, policy environment in the US to the one that produced the bad outcomes of the recovery from the 2001 recession.
By not being permitted to increase energy usage, all the money is being made with capital, instead of physical things, which helps those at the top.
The only fields "available" if you will, to making money with are those that are intangible, capital, intellectual property, things like that. And those types of things help those at the top.
Sure, but I will still take a mild recession over the multi year double dip 1980 variety.
Seems like what you are really saying is that you want an 80s style boom recovery - me too!
No, I’m worried that the recession, even if not severe in aggregate terms, will be the occasion of a policy response that will set us up for an extended period of bad economic experience for most of the population despite a strong aggregate economy culminating in a catastrophic aggregate collapse both caused by and compounding the bad experience of the bulk of the population.
Top line aggregate numbers don't capture the general experience of the economy.
> Seems like what you are really saying is that you want an 80s style boom recovery
No, I am saying (to the extent a recent historic precedent is the model, though I don't expect the specific causes can or should be replicated) I want a 90s style boom recovery; the 80s “boom“, while not as bad as the 2000s expansion in distributional terms, was far worse than the 90s boom (e.g., real hourly wages fell through 1980s expansion, while rising overall—leveling out in the first few years, and rising strongly after—in the 1990s expansion.)
Ceteris paribus, I would agree, but I don't think that policy response and the effect on the distributional shape of the post-recession recovery is independent of the dimensions of the recession (though there are other aspects of the economic and political context that play a role.)
There was a general feeling that the preceding recession never ended leading into the Great Recession and the reason for that is that if you look at the experience across the economy adverse conditions persisted across most income segments despite aggregate expansion. It is my contention that as well as an alignment of the right political conditions when the recession occurred, the policies which contributed to this were able to be implemented and sustained, in significant part, because the aggregate recession was short and mild.
Are you saying it feels like a recession or that we have already had two quarters of declining GDP?
Otherwise, language would be impossible.
What is the definition of “being sick”?
You can see prices going up, people losing huge amounts of buying power, companies laying off people, all at the same time and almost none of the opposite.
Whatever the time it takes, that is a recession.
That's the problem with applying "I know it when I see it" to an economy. Anecdotes from our daily lives and viral social media posts don't even begin to tell the full picture of activity among 330 million people. And the aggregate indicators are necessarily lagging.
if they had been hiring, they wouldn't need the help wanted signs - now when i see help wanted i think "doesn't offer high enough wages to get help"
Actually, as you're seeing, defining words based on how you feel makes language more difficult than just understanding what the article is about.
The Economist is using the word "recession" to mean what economists define it as: two consecutive quarters of negative GDP growth.
So what's the point of commenting on the article and then rejecting the article's assumption? If someone wrote an article on compilers, would you jump in to say that Microsoft Word is a compiler in your heart?
The accepted definition of the word "recession" is not "how pfortuny feels about his financial prospects whatever the GDP says."
We have a somewhat sane definition, but we can’t use said definition because we don’t feel like it, and that makes everything clearer (“language would be impossible”).
Feel free to define your own terms, don’t pretend terms are undefinable…
US GDP dropped 1.4% in the first quarter, so it's entirely possible that a recession has already started. If GDP declines again in the next quarter, then at that point it will (retroactively) be confirmed that there is presently a recession.
https://www.chicagofed.org/research/dual-mandate/dual-mandat...
There's no free lunch where you get to shut down big sections of your economy for a year or more and then afterwards it's like nothing happened.
Either high inflation causes a recession or the things you do to avoid high inflation causes a recession.
I'm not familiar enough with historical examples of inflation to know.
This reduction in spending will largely affect non core spending like services and luxury-ish/luxury goods like electronics, cars, houses, etc. This happens to be where the bulk of the US economy is focused which means a slow down in spending there will effect workers in those industries.
Couple that with higher core good costs and just natural momentum in regards to spending. You're left with large parts of the economy that experience a flywheel effect that make it harder to purchase things and further reduce the ability to spend on other non-essential goods and even when things start to change, peoples mindset on spending takes years to shift with it.
All of this leads to reduced demand and ultimately a recession.
Which sector(s) do you claim is gouging people for higher than normal profits? Have evidence in the form of profit/loss records?
Inflation alone will increase the numerical value of revenues and profits.
Gouging implies sellers are making significantly more than they used per same amount of sales.
So to demonstrate gouging you should demonstrate increased profit/revenue. I have looked at multiple industries main players, and find no evidence of this (as has many economists).
Again, does anyone have solid evidence for this claimed "gouging" in some sector other than opinions?
You realize the creative accounting companies do to make their profit as close to zero right?
For example, look at the number of stock buybacks. This is money that you're spending with these companies for them to go buy their own stocks, reducing their tax burden.
Theres a ton more. Do you have evidence price gouging isn't happening? Other than looking at the most basic thing of profits?
No. Companies pay tax on profit, then use post tax profit to buy back stocks. Learn tax law before making up stuff.
> You realize the creative accounting companies do to make their profit as close to zero right?
Anything they do illegal under tax law should (and is) prosecuted. There is no need for any entity, whether it be a person, a company, a non-profit, a charity, any entity, should pay more in taxes than the laws states.
>Do you have evidence price gouging isn't happening?
Yes, it does not show up in economic analyses of companies. Economists who also study such things have written they also don't fund evidence.
So, now do you have evidence there is any sector wide gouging, other than hand wavy pop culture feelings and rambling?
I told you really solid evidence that the allows checking the pop ignorance on the issue. Now provide the solid evidence to the contrary. Invoking wizards and magic and conspiracies is not evidence.
https://www.cnbc.com/2022/05/24/bank-of-america-ceo-says-not...
The tricky thing about inflation, is once people start to believe inflation will continue it takes a whole lot of pain to stop the wage / price spiral and convince them otherwise.
Let inflation get out of hand, and it's very hard to put back in the bottle.
https://www.federalreserve.gov/newsevents/pressreleases/mone...
The effects of raising interest rates in May take at least 12 months
lol no, US didn't have 30 trillion in debt last time and didn't have a peer competitor to offer an alternative currency like China. Eventually other countries are going to get tired of subsidizing poor US government decision making and move to something else. The US pulling financial stunts like they did with Russia is making even neutral and allied countries look for alternative or backup financial systems
US has to stop inflation which also makes their debt more expensive to manage. Worst case scenario is basically a death spiral. Best case is still vastly lowered living standard for US citizens.
our economy has been propped up by massive debt spending that hasn't been efficient at all. Productivity can't be faked using financial tricks, only innovation that boosts productivity matters
Until China is a lot more transparent, the yuan won't be a major reserve currency.
> US didn't have 30 trillion in debt
That's not how national debt works, like, at all.
That means that food security issue is far less of a problem.
but China won't have many worries about food or energy insecurity now because US sanctions have forced Russia into their arms. China will have all the food and oil they need via Russia and they'll get it cheap
>That's not how national debt works, like, at all.
rapidly increasing debt with no economic growth is a good thing?
my latest conspiracy is that china conned russia into getting embroiled in a war via bad intelligence in order to:
A : evaluate western response and capabilities
B : bottom out the cost of russian food and fuel for their own benefit
That's pretty much the whole point of Fed monetary policy, balancing the desire for price stability (low volatility) and low inflation with that for full employment by moving the right money vs. loose money lever.
(Fine tuning distributional impacts is not their job, but retained by Congress which has more levers to pull, but unfortunately Congress tends to be asleep at the switch on economic policy when they aren't actively pushing in the wrong direction.)
A recession happened in 2008-2009 due to greedy mortgage investments, and the fed stepped in with quantitative easing (QE) to fix it. Yes, many people lost their jobs and houses, but for the next 10 years, the economy recovered and GDP boomed.
A pandemic hit in 2020, the fed stepped in w/ QE again. Inflation and war today, fed steps in again w/ quantitative tightening (QT). The masses are always so prone to basic survival instincts of fear (FUD) and greed (FOMO).
On the backstage, businessman & financiers take advantage of this psychology for economic gain: selling gold, crypto, ICOs, IPOs, SPACs, pulse oximeters, mortgages, what have you...
While these elite brainwash the masses (via search, social media, trad. media, entertainment, etc.), the fed is "demonized" for keeping the country hustling, producing, and growing [1].
Printed money? It is to keep you productive and prevent you from loosing your mind...be grateful for having a government that can step in to help instead of actually stealing from people [2] and having a work culture that can justify/fuel this [3].
As long as these tenets stay, demand for the American dream/way of life/dollars will survive, so take a deep breath...
[1] Insider's POV: https://news.ycombinator.com/item?id=31589103
[2] https://en.wikipedia.org/wiki/Corruption_Perceptions_Index
Everyone would rather shut up, as long as they get paid. The internet just amplifies these behaviors anonymously.
No conspiracy needed either. As sinister as this sounds, this is how people and society work, if you bother to look...
Ex:
1. Jim Cramer: https://www.youtube.com/results?search_query=jim+cramer+mani...
2. Book: https://www.amazon.com/Trust-Me-Im-Lying-Ryan-Holiday-audiob...
3. The Social Dilemma: https://www.imdb.com/title/tt11464826/?ref_=nv_sr_srsg_3
.... also due to people taking mortgages they could not pay to try and win housing bingo.
If people had not promised to pay for mortgages they could not, lying on forms to get such mortgages, then they would not have defaulted at record rates, increasing risk for investments.
And it is correct - see my other post in this thread with all the relevant FRED data series on people's finances leading up to the 2008-2009 crisis. People most certainly ran many of their own indicators to record highs before the crash, by choice, by choosing more debt than they could manage.
Or you can face that people do choose to buy things.
The fact is that many, many of them were trying to win a real estate lottery.
Here's [1] FRED mortgage payments as a percent of disposable income leading up the crash. Notice the record all time high? That is people choosing to run up debt for decades until it popped.
Here's [2] the FRED series on household debt as percent of disposable income leading up the crash. Again, note the all time high and run up period.
Here's [3] FRED series on household debt to GDP - same result.
So you can claim somehow people were cattle with zero input on any financial choices or consequences, but that's simply not backed by the evidence.
People were choosing to believe that the gains would never stop.
[1] https://fred.stlouisfed.org/series/MDSP
How does anyone even take this metrics seriously?
And since COVID hit, people have been yelling recession every month since. At this point, I don't think there's much of a benefit for a regular joe to know when the recession is going to hit. Best bet is to ride it out when it does hit and have a few months (3-9) of savings to ride out the storm if you happen to lose your job.
It is sort of like the opposite of an emergency credit card.
My savings (including 401k) have gone down 24% since a year ago. Dinner at a restaurant / UberEats costs 30% - 50% more than a year ago. What else must happen to call it what it is?
Stock market valuations and cost of eating out don’t factor into it.
Generally though we are looking for a couple month period of time in declining employment, GDP, etc...overall health of the economy.
> The committee places particular emphasis on two monthly measures of activity across the entire economy: (1) personal income less transfer payments, in real terms and (2) employment. In addition, we refer to two indicators with coverage primarily of manufacturing and goods: (3) industrial production and (4) the volume of sales of the manufacturing and wholesale-retail sectors adjusted for price changes. We also look at monthly estimates of real GDP such as those prepared by Macroeconomic Advisers (see http://www.macroadvisers.com). Although these indicators are the most important measures considered by the NBER in developing its business cycle chronology, there is no fixed rule about which other measures contribute information to the process.
Are you exaggerating or were you just extremely careless in your investments? S&P500 is down 1.4% and Nasdaq is down 11.0% since June 2nd, 2021.
Most of my savings are in index funds, specifically FNCMX and FFIDX. I know in very real terms the value of my savings is down 23.57% compared with November 23rd 2021.
In technical terms, it’s strictly referring to the amount of production that is taking place in the economy, it has to be reducing.
Your stock portfolio going down isn’t a recession, pricing for specific foods/services increasing isn’t a recession.
If all your assets are equities, you might not feel like you are doing that well. If your assets are in real estate, you are probably richer than you've ever been.
since these indicators are always published after a time period has occurred and been tabulated, its possible we have crossed the threshold and are in a recession as we speak.
Q1 2022 is estimated at -1.5% right now, the final number will be released on 6/29. Meaning Q2 final data will be released sometime around the end of September, to make it an "official" recession (if Q2 ends up being negative).
Unfortunately, unless you a a politician or a professional economist, your opinion will lose value even faster than your salary. .
If your 401k correlates much with the S&P 500 to some degree, can't you comfort yourself and get some additional perspective just by looking a few years back, rather than one?
https://seekingalpha.com/news/3845238-pace-of-job-growth-exp...
There is no way in hell that we're currently in a recession with that kind of job growth and low unemployment.
Yup - the growth the past 2 years has been great. Up 33%!
Over the past 5 years, 70% growth.
Looking at short timelines doesn't tell you much. There's some fear in the investment world, but the market is not "the economy." It's more of an indicator of what's going on in the minds of investors. They might think we're already in a recession, or are heading towards one, that doesn't make it so.
there is an ocean of opportunity, it's just that investing in it is less likely to maximize alpha and more likely to benefit all our children and grandchildren at some immediate financial risk to ourselves and direct dependents
Roughly 1/3rd of America is over 55+ [1], the highest it's ever been (I believe), and the average baby boomer retirement savings are ~$200k [2]. Asset prices falling is an existential and imminent danger for these people. If prices stop rising, they will have to be supported directly by family or the state, or go out onto the street.
For every working-age HN commenter calling for blood to run through Wall Street to be able to buy a starter home, there are just as many people terrified of the future.
[1] https://www.populationpyramid.net/united-states-of-america/2...
[2] https://finance.yahoo.com/news/average-retirement-savings-ba....
[2 alt] https://www.fool.com/retirement/2021/08/24/heres-baby-boomer...
Even with Social Security payments however I still think a sharp fall in home prices or stock prices would be catastrophic for the retiring generation.
[1] https://www.washingtonpost.com/business/2021/09/03/social-se...
[1 skip paywall] https://archive.ph/OaBIv
EDIT: changed social security going from "bankrupt" to "cutting payments"
Longer term, I'm pretty confident you're incorrect.
The Fed is looking at the wage increases in the economy (which are blunting the effects of commodities inflation on the consumer) along with unionization drives and will definitely be hitting the brakes hard on the economy.
So for example:
"Fed Governor Christopher Waller says he's prepared to take rates past 'neutral' to fight inflation"
https://www.msn.com/en-us/money/markets/fed-governor-christo...
But to really throw the brakes on the economy the yield curve should actually invert and short rates should be at least 3-4% or more.
And I disagree with the title article that the recession is likely to be "mild" since the Fed is going to introduce significant amounts of pain and things like CMBS are pretty much primed to detonate and create a financial crisis (along with the likelihood of a massive crypto collapse). If the Republicans take over congress that will also create a lot more excitement than in 2008 since many of the Tea Party Republicans are ostensibly against bailouts and TBTF and will see economic chaos as a way to damage Biden.
Good cop, bad cop: "Bullard says U.S. Fed could cut rates in 2023, 2024 once inflation under control"
https://www.theglobeandmail.com/business/international-busin...
given the rise in wages and overhang in jobs i don't think getting inflation under control will be easy.
"US fed could cut rates in 2023, 2024 once the economy has been pushed into a deep recession" is how I read that statement.
It's pretty amazing that the US has continued to grow over the last 15 years.
Aggressive quantitative easing since 2008, and then a short pause, and then tons more of that in 2020
Just sharing because I think it's a helpful tool.
No, the usual rule of thumb is “two quarters of negative GDP growth” not “two quarters of lower GDP growth than the prior two quarters”.
(Though for the US, the closest thing to an “official” recession definition—which is neither official nor even government—is “the NBER has declared a recession”, which is done based on multiple dimensions with no explicit criteria.)
[1]https://www.newyorkfed.org/research/capital_markets/ycfaq#/i...