THE ANALYSTS: America playing politics over recession declaration
CEO of Profit Jumpstarter, Keisha Bailey says the United States may be reluctant to officially declare a recession for fear of another stock market crash.
Following a 1.6% decline in Gross Domestic Product (GDP) in the January to March quarter, the US economy contracted a further 0.9% for the April to June quarter. This met the long-standing, generally accepted rule that two consecutive quarters of negative GDP growth signalled the start of a recession.
However, US officials have vehemently denied that the economy is in a recession, pointing to a relatively strong and growing job market and a 20-year low unemployment rate.
Speaking on Taking Stock with Kalilah Reynolds, Bailey noted that international markets suffered their worst 6 months performance since 1970, this year.
“Once we do have that official declaration, we will have investors panicking and some investors may then go into a selling frenzy and because the first half of the year has been the worst since 1970, we do want to come out of that,” she said.
She noted, however, that the US has met several recession indicators.
“We have that technical data that where we have two consecutive quarters of negative GDP growth, we have also rising prices with inflation being a problem this year and there are also product shortages because of the Russia/Ukraine war and supply chain problems,” she noted.
Bailey said that the National Bureau of Economic Research which is the entity that declares recessions, likely will not make the declaration as the job market has seen steady growth and there has been a 6% increase in wages this year.
“I’ve even seen media reports that it’s the lower income classes that are in a recession but the higher income classes are not because their spending habits haven’t changed,” she noted.
According to Bailey, despite the current hesitancy to declare that the US is in a recession, it is obvious that the economy is stalling and a declaration will eventually come.
“Looks like a recession, sounds like a recession, it likely will be. Maybe not in this present moment but later this year or early 2023 we could have that official announcement,” she said.
Bailey also added that even in a recession, there will be opportunities for investors to make money if they take advantage of the right opportunities.
Catch THE ANALYSTS on Taking Stock with Kalilah Reynolds on YouTube. New episodes premiere Live every Tuesday at 8pm.
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