The recession may have started ‘late last year’: economist

The U.S. economy could have slipped into recession before the calendar changed in 2022.

“I wouldn’t be surprised if they… [the National Bureau of Economic Research] actually pushing the start of the recession to the end of last year,” Dreyfus Mellon’s chief economist Vincent Reinhart, who spent 24 years in various research roles at the Federal Reserve, told Yahoo Finance Live (video above). “So we could is going into one of the longer recessions ever.”

The National Bureau of Economic Research (NBER) uses six primary data sources to make the official determination of a recession, which is defined by the private, nonprofit research organization as “a significant drop in economic activity spread across the economy and lasting more than a few months.”

Considered a more unofficial recession indicator, the Bureau of Economic Analysis (BEA) said last week that second-quarter GDP fell 0.9% as consumers and businesses cut spending amid high inflation. This marked the second consecutive quarter of economic contraction, after GDP fell by 1.6% in the first quarter. Two consecutive quarters of contracting GDP is widely regarded as a ‘technical recession’.

Recessions are ‘always messy’

Recent earnings warnings from major retailers such as Walmart and Target, lackluster consumer confidence readings and weakening manufacturing data fuel chatter about the recession.

“There are many reasons to think the recession won’t be deep,” Reinhart said. “Recessions purge excesses in the economy. We haven’t built up many excesses. But they’re always messy. We’re going to learn something about someone’s balance sheet. We don’t know who that is. I don’t know what we’re going to learn. But it won’t be pleasant . That happens every time.”

The NBER has not stated that the US economy has passed the nuanced threshold for an official recession statement, and any statement generally lags behind the experience of a recession.

“The NBER’s definition emphasizes that a recession involves a significant decline in economic activity, spread across the economy and lasting for more than a few months,” the organization said on its website. “In our interpretation of this definition, we treat the three criteria — depth, diffusion, and duration — as somewhat interchangeable. That is, while each criterion must be met individually to some degree, extreme conditions revealed by one criterion, partially compensating for the weaker. cues from another.”

A character representing the Anaheim Ducks performs during a pregame show for a game between the Ducks and the Vegas Golden Knights at the T-Mobile Arena on December 31, 2021 in Las Vegas, Nevada.  (Photo by Ethan Miller/Getty Images)

A character representing the Anaheim Ducks performs during a pregame show for a game between the Ducks and the Vegas Golden Knights at the T-Mobile Arena on December 31, 2021 in Las Vegas, Nevada. (Photo by Ethan Miller/Getty Images)

Some of Reinhart’s colleagues on the street are not sold that these conditions have been met.

“For us, the main things we focus on is the continued strength in the job market,” JP Morgan global market strategist Elyse Ausenbaugh said on Yahoo Finance Live last week. “Looking at the components of GDP, the fact that consumers are still spending in real terms and that things like credit card delinquencies remain at an all-time low is an encouraging sign that while the window is narrowing, we’re still not be in that recession.” -type of scenario we are monitoring that could potentially occur. ”

Brian Sozzi is a great editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.

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