Are we in a recession or not?
We’ve got two consecutive quarters of GDP contraction.
Nearly every part of the US economy seems to be slowing down.
The semi-vibrant jobs market is the last holdout. It’s what has kept some, like the NBER, from making the official recession call.
We’re about to get two important pieces of news that can ossify a recession:
- October 7, 2022: Jobs Report
- October 13, 2022: September’s CPI Inflation number reports. High inflation increases the chances of another big interest rate hike, further slowing the economy.
Third quarter GDP reports October 27th. This could come with enough fanfare to be confused for a royal wedding.
Many believe that the NBER won’t declare a recession before midterm elections, which are just a month away, on November 8th.
Others say that this whole recession declaration thing is faker than what you tell your dentist about your flossing habits. They believe the NBER won’t declare a recession until after the midterms.
What will happen next?
Like you always hear my say on the podcast, it’s about “history over hunches”.
Historically, real estate prices hold strong in recessions. The 2008-09 GFC is one exception. There was a glut of housing then.
This time around, the supply of housing is so low, that even if unemployment doubles, expect a rent-paying tenant in your property.
CoreLogic expects home prices to rise 3.2% over the next year.
It’s not just semantics.
One reason why a recession decision matters is that it affects consumer sentiment. Some people panic.
Once there is one, people will spend less, save more, and borrow less. In turn, companies produce less and freeze hiring. That’s why it’s bad for stocks.
In the first six months of this year, American households lost $9 trillion in wealth due to the stock market plunge, per the Federal Reserve.
Now you can annoy everyone with this information at your dinner party this weekend.
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