Is a Recession Looming?

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It’s no secret that the U.S. economy has been somewhat shaky since the start of the COVID-19 pandemic, and this has many people asking if there’s an imminent recession ahead. Read on below to learn everything you need to know about whether or not there may be a recession looming.

Possible warning signs

Luckily, a recession rarely catches the country blindsided, as there are a variety of factors that can give some insight into the future of the economy. Some indicators that there may be a recession coming include rising inflation and interest rates and a general public nervousness about the economy.

Ever-rising inflation

On everyone’s minds this last year has been the continuously rising inflation affecting people all over the country. As of June 10, the expected inflation rate for this year is 6.8%, the highest it’s been in decades.

Rising inflation can cause small businesses to struggle and lay off workers if they can’t raise their prices at the same speed, and this can set off a whole chain of events that negatively affects the economy.

High interest rates

Unusually high interest rates are another possible sign of a recession – and certainly one that’s being seen right now. As of now, the average rate for a 30-year fixed-rate mortgage is nearly 6%, and the average rate on a 15-year mortgage is 5.2%.

Consumer expectations

One important potential sign of a recession is simply that people expect one. Ironically, when people expect a recession to come, they tend to stop spending money to prepare for hard times, which leads to a lack of economic stimulus and can cause a recession.

While we haven’t seen a decrease in consumer spending yet, it’s possible that these apparent levels of discomfort with the state of the economy will lead to times of worry ahead for the country.

Positive indicators

While there are some concerning economic events going on right now, there are also several positive indicators that might mean the economy bouncing back. Two of the most important of these are the almost record-breaking low unemployment rate and the increased level of consumer spending as the COVID-19 pandemic fades.

Low unemployment rate

A low unemployment rate is obviously a good economic indicator, and the current rate is almost the lowest it’s ever been. As of May 2022, the unemployment rate was 3.6%, lower than it’s been since the start of the COVID-19 pandemic in 2019. Before 2019, the unemployment rate hadn’t been this low since 1969.

Consumers are spending more money post-COVID

Another benefit of the COVID-19 pandemic fading out is that consumers are spending more time out again and consequently spending more money. A variety of studies and metrics have shown that people are spending more money than they were a year ago, and that this spending hasn’t decreased significantly despite the inflation and economic uncertainty.

Hopefully, high levels of spending will lead to confidence in the economy and continue to keep the country running.

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