Rumors and foreboding about a U.S. economic recession have gone in different directions, however, it appears that some may be changing their minds.
The beginning of 2023 was complicated, first because Americans were facing since 2022, inflation so high, it has even reached historic highs. Second, because there began to be a wave of massive layoffs in different industries, but mainly in technology. All this has generated uncertainty, anguish and the worst fear of all is that an economic recession will spread.
Many experts have argued that an economic recession in the United States is imminent. But now, it seems that some are starting to back down: one of them is the CEO of JP Morgan, Jamie Dimon.
And it’s no coincidence. The financial giant spent much of 2022 warning that an economic recession was imminent, and Dimon even warned investors to prepare for the economic hurricane that was about to begin in the United States.
Several months later, it appears that his message is being softened by himself. “The U.S. economy right now is doing quite well,” Dimon said, recently.
“Consumers have a lot of money. They’re spending it. Jobs are plentiful,” he said, referring to the current economic situation in the United States.
Also, in those same statements, he acknowledged that “there is always uncertainty. That is normal,” he reiterated.
In January, the national unemployment rate was reported at the levels prior to the coronavirus pandemic and, in addition to that, it reached a minimum that had not been reached in 54 years. On top of that, inflation has not come down as much as expected at this point, in part because consumers are still spending money.
Added to this is the fact that the U.S. Federal Reserve (Fed) has had to raise federal interest rates to cushion inflation. This has an impact on all bank lending because, although not directly related, financial institutions react to the Fed’s hikes.
How to protect yourself from an economic recession
The most important thing, according to experts, is to have an emergency fund, which allows you to be able to act in economic matters. They also advise that those who have credit card debt should get rid of it as soon as possible, as dealing with high-interest credit cards can be a crippling worry.
Another thing you can do is to identify some products whose value increases when you are experiencing an economic recession. That is, activities that are fundamental, as is the case of infrastructure, no matter how many economic problems there are, this area does not usually stop.
Why an economic recession occurs
An economic recession occurs when there is a period of two consecutive quarters in which there is a contraction in the U.S. economy, generally represented by a drop in production and an increase in the unemployment rate.
The economy is said to be slowing because it is growing much more slowly. And when the economy has a contraction, then it becomes a negative. And if this happens for two consecutive quarters, then we can say that the economy is in recession.
Experts say that economic recessions move in cycles, so when a country goes into an economic recession, then there is an improving context and then the economy starts to grow.
An economic recession causes three things:
- Supply chain problems
- Crucial expectations
Although various experts now rule out that an economic recession will occur in 2023, some say it could start in 2024 or even begin in the last months of 2023, to arrive in full force by 2024.
“The increase in the probability of recession is a consequence of the tightening of financial conditions in a context of high interest rates and the expectation that annual inflation will remain above the Federal Reserve’s target in the medium term,” said Eduardo Morales Sanchez, economic-financial analyst at Banco Base, in an interview with Investing.com.
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