U.S. Heads Towards Recession – What Are the Signs? In April, Deutsche Bank became the first major bank to forecast that the United States will enter a recession period. After first predicting a “mild” recession, the bank later doubled down and warned of a “major” economic problem.
“We will get a major recession,” Deutsche Bank economists said in a client note.
The bank said that even if inflation is beginning to peak, it will take some time before it returns to the Federal Reserve’s goal of 2%.
“We regard it as highly likely that the Fed will have to step on the brakes even more firmly, and a deep recession will be needed to bring inflation to heel,” bank analysts said in a note titled “Why the coming recession will be worse than expected.”
Since then, other major analysts have predicted a recession in the United States, and the Federal Reserve’s recent interest rate hike suggests that the central bank knows it’s on the way, too.
Companies Are Preparing
America’s biggest companies are preparing for a recession in many ways. For Meta, the parent company of Facebook, a hiring freeze will ensure the company doesn’t commit to new projects and unnecessary expenditures at a time of major economic uncertainty.
The freeze is expected to extend through the rest of the year, and an internal memo seen by Business Insider proves that the decision was made in response to an “industry-wide downturn.
Online TV streaming platform Netflix is also on its second round of layoffs in just one month, announcing 150 redundancies across multiple divisions of the company.
E-commerce furniture company Wayfair also implemented a 90-day hiring freeze and Amazon admitted in its latest quarterly earnings call that it had overstaffed during the first quarter of the year.
What Are the Signs?
A recession is defined by rising unemployment, negative gross domestic product, and declining economic performance across the board. The technical definition is two quarters of negative economic growth. The United States is experiencing many of the classic indicators of a recession already.
While the U.S. economy is not yet technically in a recession as per the technical definiton, a Bloomberg survey of 37 economists suggests that the chance of a recession occurring soon has reached 30%. That’s double the standard 15% chance in normal circumstances, which takes into consideration unexpected events that can hurt an economy.
Gus Faucher, an economist from PNC Financial Service Group, says that the chance of a recession this year is “pretty low” but that it “gets dicier in 2023 and 2024.”
Some of the signs that a recession could occur sometime in 2023 include the fact that GDP unexpectedly shrank in the first quarter of this year. A report from the Bureau of Labor Statistics published earlier this month revealed how GDP contracted by 1.4% on an annualized basis from January to March, despite economists predicting growth of 1.1%.
Chris Zaccarelli, the chief investment officer for the Independent Advisor Alliance, said that the surprising drop in GDP was a “wake-up call that the economy isn’t as strong as we all thought.”
As inflation continues to hurt American workers and rising interest rates discourage borrowing, a recession also becomes increasingly likely. With Americans spending less and businesses no longer hiring, a recession almost becomes inevitable.
Jack Buckby is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and reports on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society.