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For: Real America News Updated 30 Apr 2022, 19: 04 pm EDT
Following Thursday’s report, in which the Commerce Department announced that the US economy shrank at an annual rate of 1.4% in the first three months of 2022, various banks have begun to forecast an economic recession in the coming years.
Deutsche Bank, Goldman Sachs and Bank of America are some banks that signal a possible economic recession, which, if it comes true could have serious implications for millions of Americans.
There is talk of a recession when two consecutive quarters of negative economic growth are recorded, are often characterized by high unemployment, low growth of low or negative GDP, a drop in income and a slowdown in retail sales.
However, pre Saying them is very difficult because they depend on many factors. These are some keys to recognize the warning signs that a recession is in sight:
yield curve
A recent Wells Fargo analysis suggests that consumers should watch for a telltale sign on the yield curve : if the yield curve 1-year US Treasury yield exceeds US Treasury yield at 10 years, in more than 25 basis points, and for at least four consecutive weeks.
That has not happened since March 2022, shortly before the covid-pandemic 19 will shut down a wide swath of the economy and trigger a recession.
Overheated economy
When this happens there are two key characteristics e: increasing inflation and unemployment below its “natural” rate, causing growth to occur at an unsustainable rate. Although it can be sustained temporarily, spending will eventually fall for supply to catch up with demand.
Almost every recession since World War II have presented an increase in inflation before the recession began. The largest was the eight percentage point increase in pre-recession inflation from 1980.
The government reported earlier this month that the consumer price index rose 8.5% in March from a year earlier, the fastest pace since December from 1981.
The Increasing inflation has sparked concern among economists that a recession could be in the offing. the horizon as the Fed moves to rein in skyrocketing prices with a series of mega rate hikes s of interest.
Economic shocks
However, recessions are not always caused by some kind of overheating. There are negative and unexpected external events, which economists refer to as “shocks” , which have the power to interrupt growth.
A classic example is the oil shocks of the decades of 1970 Y 1980, which meant that those recessions featured strangely high inflation and high unemployment.
The covid pandemic-19, which triggered one of the shortest but most severe recessions in US history, also had a external as the virus forced an unprecedented shutdown of the nation’s economy.
The economy lost 22 million jobs and unemployment increased to 14.7%, the highest since the Great Depression.
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