The total economic activity is measured by GDP - Gross Domestic Product. It’s a measure across the entire GIGANTIC multi trillion dollar national economy. It’s not your family’s, city, county or state GDP.
Most of the time GDP is slightly growing - called “expansion”. if you even out the repetitive expansion/recession cycles, the result is a straight line moving up long term.
The GDP calculation can be misleading! That’s a topic all by itself. Read our “GDP Primer” blog post here.
But like many economic and natural quantities when measured, this measure moves up and down by relatively small amounts; it cycles. Call it the business cycle. The timing and depth/height of these cycles cannot be predetermined.
Occasionally the GDP number contracts instead of grows. If it contracts for two quarters in a row, it is labeled a “recession”. It’s a label, nothing else. Recession, though not desired since it represents a slight softening of overall national economic activity, is normal and expected in the ongoing business cycle.
You only know the economy has been in recession after the fact. People guess, ‘I think we may be in recession now.” The answer is only known after the fact.
Journalists and other content producers need to attract eyeballs to their content. Whether cable news, websites/streaming, social media, emails, junk mail and, yes, even magazines and newspapers. Fear mongering always attracts eyeballs, particularly stories that we think could impact our family’s financial security.
As you are moving about in the world around you, it would be difficult to be able to sense recession. Because no matter if the GDP numbers show that we were recently in expansion or recession, you will see layoffs, hiring, bankruptcies, start-ups growing, markets declining, rising, construction of new buildings, kids growing up, etc. The world continues operating no matter if we were recently in recession or expansion. At any moment in time, there are signs of economic expansion and contraction to be seen - it’s always a mixed picture.
From a stock market and practical perspective - often the market drops due to recession and the recession itself is over before we know we were just in a recession.The market tends to reflect the immediate future economy. So the market drop seen in the first three quarters of 2022 could be seen as an indicator of a recession that we may be in now or soon. (Again, the way we quantify a recession, we only know when we were recently in a recession.)
Economic related statistics published regularly, promoted prominently on many platforms, can have a big impact on how we view our world, including stoking fear and concern.
For example, suppose you’ve been laid off and you’re looking for a job. I’ve helped a lot of people with training to help them accelerate their job search over the years. They may see statistics that indicate that the jobs market is currently less healthy than it had been, and that can be very disheartening.
I explain to them that if you just got laid off, the unemployment rate is 100% and if you’ve just been rehired, the unemployment rate is 0%. Even during the worst of times, companies are hiring. Even during the best of times, companies are laying off.
Our personal current financial situation is often not tied to what is going on as described by a huge national measure.
I encourage you to focus on what you can control. Please don’t allow movements of a huge national economic measure to control you or your enthusiasm.
Focus on your professional/career/financial health, or other areas of your health - physical, spiritual, relationships.
Specifically for professional/career/financial health. Take your customer experience to a higher level. Stay networked so that you are better positioned to be considered for a promotion or find a new job should you get laid off. Take a look at your spending. Increase your cash reserves to enhance your peace of mind.