Upcoming recession | What do economists predict about the upcoming recession?

Definition of recession

Upcoming recession
Upcoming recession

A recession is a severe, pervasive, and protracted decline in economic activity, or simply a very slowdown in economic growth. A recession is often defined as two-quarters of declining gross domestic product (GDP) in a row. Economic output, consumer demand, and employment all often experience reductions during recessions.

Recessions are defined differently by the Business Cycle Dating Committee (BCDC) of the National Bureau of Economic Research (NBER), which is in charge of determining the dates of the peaks and troughs that frame economic recessions and expansions: "A recession involves a significant decline in economic activity that is spread across the economy and lasts more than a few months." The depth, diffusion, and length criteria, according to the committee, must all be partially met before a recession may be said to have occurred. As a result, in order to comprehend the upcoming recession, we must consider a variety of economic activity indicators.

An adverse supply shock is an occurrence that abruptly increases or decreases the supply of a good or service, or of goods and services in general. Other potential causes of this recessionary condition include the bursting of an economic bubble, a financial crisis, an external trade shock, a large-scale anthropogenic or natural disaster, and adverse supply shocks due to other factors (e.g., a pandemic).

A common misconception holds that a depression is nothing more than an exceptionally severe or extended recession, therefore, to understand the upcoming recession, In order to believe the upcoming recession is only a recession, it is essential to know the difference between a recession and a depression.

Difference between depression and recession

A popular saying goes, "A recession is when your neighbor loses his job, a depression is when you lose yours."

This reinforces the generally held modern notion that depression is just a very severe recession. We must therefore comprehend the distinction between a depression and a recession.

What is depression?

Depression is a significant downswing in the business cycle that is much more severe than a downward trend. Business cycles refer to an increase in the unemployment rate, a resulting decline in income, a subsequent decline in business sales, a subsequent decline in output, and a resulting decrease in employment. It is characterized by greatly reduced industrial production, widespread unemployment, a serious slowdown, or cessation of growth in the construction industry, and significant decreases in trade and capital flows on a global scale. A recession may be geographically confined (limited to a single country) so as to upcoming recession, whereas a depression (like the Great Depression of the 1930s) can occur throughout multiple countries. This distinction is in addition to the severity and impacts of each.

A brief history of recessions

Over the past seven decades, there have been four worldwide recessions: in 1975, 1982, 1991, and 2009. Each of these periods saw a decline in the yearly real per capita global gross domestic product, which was accompanied by a deterioration of other important global economic activity indices. The worldwide recessions caused serious economic and financial disruptions in many nations throughout the world and were highly synchronized on a global scale. The global recession of 2009, which was brought on by the global financial crisis, was by far the most severe and well-timed of the four recessions. Advanced economies took the burden of the recession because they were the hub of the issue. In industrialized economies, the expansion that followed has been the weakest since the end of World War II because so many of them have had trouble overcoming the effects of the crisis. In contrast, the majority of developing and emerging market economies fared better during the global crisis of 2009 and produced a faster recovery than in the past. Again, the developed economies of the globe are most likely to be affected by the upcoming recession.

1973–1975 recession

The 1973 oil crisis, OPEC's quadrupling of oil prices, and the 1973–1974 stock market meltdown caused the United States to experience a stagflation recession.

1981–1982 recession

The 1979 energy crisis was brought on by a dramatic rise in oil prices worldwide following the Iranian Revolution. This was brought on by the newly installed Iranian government, which increased prices by exporting oil at irregular intervals and at a lesser volume. Another recession was brought on by the United States' tight monetary policy to combat inflation. The inflation that was carried over from the prior decade as a result of the 1973 oil crisis and the 1979 energy crisis was a major factor in the alterations.

Early 1990s recession

After the 1980s' protracted period of peacetime expansion, inflation started to rise, and the Federal Reserve responded by hiking interest rates between 1986 and 1989. This slowed growth but did not stop it, and a temporary recession was brought on by a combination of the shock to oil prices in 1990, the debt buildup of the 1980s, and rising consumer pessimism.

December 2007 – June 2009

The housing bubble in the US burst as a result of the subprime mortgage crisis. Despite rising gasoline and food costs, a global financial crisis resulted from falling housing-related assets. Many of the greatest financial organizations in the United States, including Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, and AIG, failed or collapsed as a result of the crisis, which also caused a crisis in the car sector. An unprecedented $700 billion bank rescue and $787 billion fiscal stimulus program were the government's responses. More than a year after the recession's scheduled end, the National Bureau of Economic Research proclaimed it finished. On March 9, 2009, the Dow Jones Industrial Average (Dow) attained its lowest level.

The upcoming recession of 2023

Nevertheless, after falling by 1.6% in the first quarter of 2022, the U.S. GDP shrank at a seasonally adjusted annual rate of 0.9% in the second quarter of 2022. Economists point out that American businesses are still hiring, and that Americans are still spending money. In August, the U.S. economy added 315,000 jobs, and the unemployment rate is now at its pre-pandemic level. A U.S. recession usually does not correlate with such a healthy job market.

Probable scenario

Contrary to the findings, a World Economic Forum survey conducted on a sample of 22 top economists from the commercial and public sectors on Wednesday revealed that seven out of ten respondents thought a global upcoming recession was at least somewhat likely to occur in 2023.

The likelihood of a global recession in 2017 has increased to 98.1 percent, according to Ned Davis Research, a Florida-based research company known for its Global Recession Probability Model. This is the highest probability since the 2020 global financial crisis and the COVID-19 pandemic-related downturn.

Given the continued strength of the labor market and the still-low unemployment rate, it appears that we are most likely experiencing a different type of recession. Therefore, it won't be clear for some time whether we are in a recession. However, it is obvious that the economy is in a slump, and the upcoming recession is likely to accentuate it further. There is no doubt that inflation is high, and people are having to pay more for necessities like food and utilities as well as the new or used car they want to purchase. Therefore, whether there is an official recession or not, there is real suffering.

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