Is a recession knocking on our door?

This is a question that I have been asked both directly and indirectly over the past few weeks. Some folks have even self-determined that the economy is already in a recession.

Let’s start with the basics. What exactly is a recession?

Per the Oxford Dictionary, a recession is defined as, “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two consecutive quarters”.

“Trade and industrial activity” include employment, retail sales, and manufacturing.

So, let’s take a look at these contributing factors.

GDP: (BEA.Gov)

• Q4 2021 +6.9%
• Q1 2022 “second estimate” -1.5%
• This Second Estimate is slightly negative, but one quarter does not make a trend. Two consecutive quarters of negative GDP would have me looking more closely.

Employment/Unemployment: (BLS JOLTS report)

• The unemployment rate ticks in at a very low 3.80%
• Labor force participation rate at 62.3% (Below 64% is considered “full employment”)
• 4-week moving average of initial claims for unemployment hit a post pandemic low of 179,000

Retail Sales; Personal Consumption Expenditure (BEA.Gov):

• Consumer spending, which accounts for 68% of our entire economy (Source: JP Morgan Guide to the Markets, March 31, 2022) is up +2.70% versus last year
• Year to Date Q1 2022 is +1.80%

Manufacturing: Per The Conference Board LEI report positive contributors include

• Average weekly manufacturing hours
• Manufacturers new orders for nondefense capital goods
• Manufacturers new orders for consumer goods and materials

To summarize, GDP is positive, unemployment is very low, personal consumption is positive, and manufacturing is positive.

All the above are source-cited FACTS. And based on these facts, it seems that a recession is not knocking on our doors as we have not seen a downturn/negative reporting of any of these factors for an extended period of time.

I predict that we do not see a recession in 2022, as the facts just don’t point to it. I continue to keep this information handy and update my thinking as new facts come in. But for now, a recession is not something I am actively anticipating.

I am interested in your thoughts, comments, and questions!

Respectfully,

Brittany N. Jarocki, CFP®

CERTIFIED FINANCIAL PLANNER™ Professional

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  Investing involves risk. Loss, including loss of principal, may occur. No strategy assures success or protects against loss. All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.