For over half of a decade, there have been talks about the next economic crash. And as the housing market has skyrocketed beyond most people’s imagination, this lurking crash seems to be drawing nearer by the month. And as there are talks of it coming, many Americans are already feeling it.
There were many predictions of a crash in 2018 and 2019. And by the end of 2019, there was no crash in sight, houses were continually on the rise, and predictions were simply wrong. But then by the end of 2019, there was Covid. And by March of 2020, the country came to a screeching halt.
While Covid caused an immediate economic blow that forced millions of Americans to lose work instantly, unlike the previous economic crash, it didn’t affect the housing market in the same way as the Great Recession of 2008.
And while stocks plummeted immediately, many bounced back within the same year in 2020 and into 2021. With temporary relief income from
Trump and Biden, the federal government tried to maintain some stability, swerving from an even greater recession.
Chief investment officer at Cresset Capital Jack Ablin is anticipating a recession, as everyone else, but says it will be with a small “r.” He says that things won’t fall apart as we witnessed in ‘08 and when Covid struck.
Robert Dent, senior US economist at Nomura Securities agrees and says that “there’s a limit to how severe it’s going to be.” However, Dent predicts that the economic dent might stay a little longer than expected. “The bad news is it’s going to be prolonged,” he says, anticipating that it will last a whole year.
The National Bureau of Economic Research’s Business Cycle Dating Committee defines a recession as a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.” And since 1945, the economy has experienced a recession every six to seven years.
So while a cyclical recession is inevitable, most Americans are more concerned about another catastrophic recession rather than the routine recessions with a small “r.” Considering the last two were very significant, who can blame them?
Covid-19 is comparable to the Spanish flu, and the Great Recession of ‘08 is comparable to the Great Depression of 1929. So for millenials just reaching adulthood in the 21st century, talks of another recession are a lot scarier than for baby boomers who have experienced many small recessions.
But while there is some economic uncertainty, the federal government is doing everything in its power to maintain some stability. By imposing high interest rates, the central banks hope to mitigate inflation without affecting economic development. High interest rates “should continue to temper growth and help bring demand into better balance with supply,” said Jerome Powell, Federal Reserve Chairman.
While the government is trying to maintain, talks of that cyclical recession remain constant. And while a recession is inevitable, economists in 2018 and 2019 have just mistimed its occurrence. With increased housing costs, Covid, and inflation, it seems ever lurking and soon to pop. But how soon?
Norma Holding is now predicting that a mild recession may occur at the end of 2022. However, Wells Fargo predicts a recession in early 2023, while Deutsche Bank AG economists predict mid-2023, and Bloomberg Economics’ model predicts its coming at the start of 2024.
As confusing as that may be, one thing unanimous is a recession in less than 24 months, with the majority of opinions suggesting less than 12 months. And even more than that, some think that it’s already here. According to the Morning Consult Politico Poll, 65% of registered voters believe we are in a recession now, as technically the US GDP has declined in the last two quarters.
While the GDP has declined, jobs are still plentiful and foreign investments have increased. And “that doesn’t sound like a recession to me,” said President Biden.
“This is not an economy that’s in a recession,” said Treasury Secretary Janet Yellen. “A recession is broad-based weakness in the economy. We’re not seeing that now.”
While the White House is remaining calm, as Biden says that “we see signs of economic growth,” Republicans are accusing the White House of trying to redefine a recession, pointing out that Americans are still suffering.
While jobs may be plentiful, what good is it if it’s not enough to cover living expenses? Whether we are technically in a recession or not is not the primary concern of average Americans who may not be abreast with all of the technical definitions. They are more concerned with how much liquid cash they have and what each dollar can get them. And right now, it’s not getting them much.
With rent prices at an all-time high, gas prices soaring, and the highest inflation spike in 40 years, Americans are forced to try to spend every dollar prudently to avoid feeling the brunt of an economy that may come crashing down on them.
