GDP fell for 6 consecutive months; for many, this is the definition of a recession.
BOISE, Idaho — For two straight quarters, U.S. gross domestic product (GDP) has declined, according to the Bureau of Economic Analysts.
Traditionally, many have used this measure – six consecutive months of a declining economy – to define a period of recession. However, GDP is only one part of the equation, according to University of Idaho clinical associate professor of economics Dr. Steven Peterson.
“I’ve often wondered if that definition was an urban legend or not,” Peterson said. “In fact, in one of the textbooks I use, the author uses it for a recession. In a way, it’s a simplified way of telling the public when a recession is happening – but how does that happen? if it is much more complicated.”
For a holistic picture, Peterson turns to other numbers. This includes the unemployment rate and job creation. The latest unemployment rate is 3.6%, according to the Bureau of Labor Statistics. In June, the United States created 372,000 new jobs.
“With the job market as strong as it is and unemployment as low as it is, it’s hard today to say we’re in a recession,” Peterson said.
However, Peterson is concerned about the historically high rate of inflation. The Federal Reserve raises interest rates by 0.75%. This is an effort to slow the economy and bring inflation under control, Peterson said.
This action has consequences.
“They know they’re taking a break. It’s going to be very difficult for the Fed to break inflation without causing a recession,” Peterson said. “If I had to make a prediction, I’d probably be in the crowd saying next year we’ll be in a recession.”
According to Peterson, bankruptcy rates can be used as another sign of recession. Boise bankruptcy attorney Max Williams sees a 25-30% increase in his services.
“The average bankrupt debtor is middle class. They’re not wealthy. Not even remotely,” Williams said. “99% of them are average people. I would say the median income is between $35,000 and $60,000.”
Helpers, including a car or house, often belong to all Williams clients. They have little money, and while not all of his clients are officially declaring bankruptcy, more and more people are coming to Williams to inquire about their options in these difficult economic times.
“Neither side is happy. Because in bankruptcy you have to give up all those assets. The lender can’t resell for how much they were going to get. They’re always going to run out of what they have,” he said. said Williams. “It has a ripple effect, because it’s harder for the next person to get a loan. They’ll raise interest rates to capture more money before a potential default.”