Hey, America, here's what's actually going on with the economy
Is the U.S. Economy Really in Trouble?
Despite widespread perceptions among Americans, the U.S. economy is not currently in a recession nor is it expected to enter one soon, according to experts and economic data reviewed by Business Insider. A Harris poll revealed that 56% of Americans mistakenly believe the economy is shrinking, influenced possibly by negative media coverage and public sentiment.
Economists from institutions like J.P. Morgan and EY clarify that while the economy faces challenges such as inflation and a tight housing market, key indicators like GDP growth and low unemployment rates demonstrate ongoing economic strength. Misinterpretations of economic conditions are exacerbated by varied media perspectives, contributing to public pessimism.
What specific economic indicators do experts use to assert that the US is not currently in a recession?
Experts rely on several key economic indicators to assert that the US is not currently in a recession. These indicators include:
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GDP Growth: Experts like David Kelly from J.P. Morgan Asset Management point to the continued growth in quarterly GDP as a crucial indicator. Despite a slowdown, the US GDP is still expanding, which is a strong sign against the presence of a recession.
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Labor Market Strength: The strength of the labor market is another vital indicator. Recent trends in payroll gains, although cooled, still signal a robust labor market3. Additionally, the unemployment rate remains historically low, with only a slight increase from 3.8% to 3.9% between March and April, indicating continued strong job growth momentum.
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Inflation Rates: While inflation remains elevated, it has cooled from its peak in 2021 and 2022. The Consumer Price Index's year-over-year change has been under 4%, which, although high, is lower compared to previous spikes. This suggests that inflation is stubborn but stabilizing.
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Stock Market Performance: The performance of the stock market, particularly the S&P 500, which has been hitting multiple all-time highs, is also considered. This is contrary to the belief of nearly half of the respondents in a Harris poll who thought the index had been down.
These indicators collectively help experts determine that the US economy, despite certain challenges, is not currently experiencing a recession.
What are some reasons Gregory Daco of EY cites for the pessimism Americans feel about the economy?
Gregory Daco, the chief economist at EY, attributes the pessimism Americans feel about the economy to several factors. First, he points to "cost fatigue" from sustained inflation, which has a cumulative effect on the financial burden experienced by individuals. Additionally, he mentions the "largely frozen and unaffordable housing market," highlighting how difficult it has become for many Americans to access or afford housing1. Another significant factor is the "reduced amount of churn in the labor market," indicating fewer job opportunities and less mobility for workers. This lack of movement and opportunity in the job market contributes to a broader sense of economic stagnation and pessimism. These elements combined lead to a general sense of dissatisfaction and concern about the economic future among the U.S. populace.