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What is a recession, and should Americans be worried?
Odds of recession 50/50 over next year: Harvard economist
Harvard University professor Kenneth Rogoff, a former chief economist at the International Monetary Fund, weighs in on GDP shrinking by 1.4% on an annualized basis in the first quarter.
A growing number of Wall Street banks are forecasting an economic recession in coming years as a result of the Russian war in Ukraine, red-hot inflation and an increasingly hawkish Federal Reserve.
Goldman Sachs, Deutsche Bank and Bank of America are among the firms predicting an economic downturn within the next two years, which could have serious implications for millions of Americans. Recessions, which simply refers to two consecutive quarters of negative economic growth, are often characterized by high unemployment, low or negative GDP growth, falling income, and slowing retail sales.
They are notoriously difficult to predict. A recent analysis from Wells Fargo suggests that consumers should be on the lookout for a telltale sign in the yield curve. If the slope between the 10-year Treasury yield and its 1-year counterpart invert, it could be evidence of an impending recession.
That has not happened since March 2020, shortly before the COVID-19 pandemic shut down a broad swath of the economy and triggered a recession.
"If investors want to select a single yield curve spreads as a signal, we favor watching for when the 1-year U.S. Treasury yield exceeds the 10-year U.S. Treasury yield – by more than 25 basis points, and for at least four consecutive weeks," the Wells Fargo analysts wrote.
ONE OF BIDEN'S FAVORITE ECONOMISTS SEES A HIGH CHANCE OF RECESSION IN NEXT 2 YEARS
Here are the three most frequent causes for historical recessions based on past economic slowdowns, according to a 2019 paper published by Marc Labonte, a specialist in macroeconomic policy at the Congressional Research Service.
An economy that’s overheating, meaning demand outpaces supply, has two key characteristics – rising inflation and unemployment below its "natural" rate, which causes growth to occur at an unsustainable rate. Although it can be sustained temporarily, spending will eventually fall in order for supply to catch up to demand.