- A recession is like a dark cloud,
you know, coming over the economy.
It affects businesses.
It affects households.
It changes the way that many people live their lives
and make their decisions.
As long as you have an economy that's gonna grow,
there's gonna be periods when it contracts and shrinks.
- Mo money, mo problems.
- As the country slowly comes back from the height
of the coronavirus pandemic,
one worry among economists, politicians,
and the average American is,
are we going to enter another recession?
- Aah!
- A recession is normally defined
by two consecutive quarters of negative growth,
which you can also think about as six months
of the economy shrinking.
- Every recession's kind of caused by something different,
whether it's financial markets or inflation or something else.
There's a bunch of factors that go into determining
whether we are in a recession.
The National Bureau of Economic Research
is a group of economists who study data
and, in a very non-political way,
determine whether we are in fact in a recession.
- There are other signifiers, too.
- The housing market is going to be one of the first parts
of the economy to slow down,
because higher interest rates have a really direct effect
on slowing the housing market.
But other parts of the economy might take longer to react,
the job market, for example.
It might take longer for businesses to decide
that they can afford to hire people,
that they're not gonna put in new investments
to grow their businesses.
- The current economic outlook
is causing flashbacks to the Great Recession.
But this time might be different.
- One of the main problems after the Great Recession
in 2007 and 2008 is that it took the economy
in a lot of ways a decade to recover.
It took a long time for jobs to come back.
- And we did just go through a recession,
when most of the country was locked down
and a lot of people lost their jobs.
- But this time around, after the COVID recession,
there was a huge emphasis,
in particular from the Biden administration
and many other economists,
to snap the economy back to full strength as quickly as possible.
It meant keeping unemployment benefits up.
It meant sending multiple rounds of stimulus checks to people,
all so that there wouldn't be a sluggish,
slow recovery that had consequences of its own.
- Millions and millions of people
lost their jobs within a span of weeks,
in February, March, and April of 2020.
And then as businesses started to rehire,
bringing workers back, a lot of those workers,
you know, kind of rethought what they wanted to do.
Now they can kind of change where they wanted to work.
- Bye.
- So all that disruption in the labor market continues,
you know, more than two years later.
And so workers have a tremendous amount of leverage,
even in an environment like this
where the economy's a little bit shaky or inflation is high.
- And on top of that,
major supply chain issues disrupted the economy.
- The economy is still very vulnerable
to all sorts of supply chain issues.
They're global in nature.
They affect everything from the chips
that go into your laptop and cars
to the groceries that you buy at the grocery store.
And the supply chain issues
have kept inflation really high for years now.
- Typically, you know, in the run-up
to this current environment, inflation was around 2% a year.
So, now we have inflation that's like over 8% year over year.
And so the federal reserve moved really aggressively
to try to raise interest rates to combat that inflation.
When it gets really expensive to borrow money,
you stop borrowing money.
It cools off the economy to bring inflation down,
but that can also lead to, you know, layoffs.
- So the economy isn't doing well,
but are we actually in a recession?
- The reason we're not in a recession
is because we're adding hundreds of thousands of jobs a month.
If layoffs begin in earnest, and, you know,
once someone loses their job, they stop spending money,
and then that company that they would have spent money at,
maybe they, you know, start laying off people.
Once there's that domino effect,
that's when a recession could sink in.
- Even now, more than two years since the pandemic shut down
the economy, there's plenty of confusion
around whether or not the federal reserve
can slow the economy just enough,
which is really hard to pull off,
or whether their really aggressive moves
to get inflation under control
are going to lead to a recession soon.
- Are we there yet? - No.
- It's just a matter of time.
It's like asking someone is it gonna rain?
Yes, it's gonna rain.
We just don't know when it's gonna rain.
Yes, there's gonna be a recession.
We just don't know when it's gonna come.