What does recession mean for the USA?

Question

Does it only mean we are headed towards a decline in our economy? What does that mean then? Higher interest rates? Higher unemployoment rates? Housing slump?

Answer 1

In a recession you'd typically expect:

- A declining GDP (negative GDP growth) for two consecutive quarters: this is the definintion of "recession".

- LOWER interest rates -- definitely not higher ones (The Federal Reserve will lower the rates it controls in an effort to stimulate the economy, as soon as they realize a recession is setting in.)

- Increased unemployment rate, the rate might go up a point or a point in a half over six months or so, say to 5.5% or 6%.

- Stock market decline of 10 - 20 percent or more over a few months (this would likely begin months before the recessions, it's a good predictor)

- Not necessarily a housing slump -- the falling interest rates on mortgages may counteract people's reluctance to buy a new house.

- A large number of people with very short memories will decide, as soon as a brief recession becomes evident, that free market capitalism has permanently failed and we were better off with Joe Stalin.

- Even though the recession will end in about 6 months, the news media will remain obsessed with the "ongoing brutal recession" for about 4 years before it finally sinks in that the economy has long been growing again.

- Basically, if you retain your own job, things are just fine and you may even benefit from lower interest rates. But anecdotally you'll notice talk among friends and relatives of layoffs or companies going under. Maybe your own company will have have layoffs. Depends on the industry of course.