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Snapshot: Recession. Are We There Yet?

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Growth forecasts are down, but are they out? In spite of negative growth in Q1 and a slowdown in Q2 growth expectations, our colleagues in Global Investment Research are doubtful that the US is already in a recession. 

Who gets to decide? No matter what you’ve heard about two quarters of negative growth defining a recession, the official call in the US is in the hands of a committee of economists – the NBER (National Bureau of Economic Research) Business Cycle Dating Committee. 

How do they decide? They say a recession “involves a significant decline in economic activity that is spread across the economy and lasts more than a few months.” Right now, many of the indicators the committee tracks – including gross domestic income, industrial production and payroll employment – are still growing. 

But what’s the most important factor? Our colleagues believe the path of inflation is the most important factor in recession risk. But while we’ve just hit a new 40-year high in headline CPI, the path may be taking a turn. Slower growth and a stronger supply chain seem likely to bring inflation pressures down as the year goes on. 

What else should we be watching? The payrolls report shows job gains are still going strong but, according to our economists, other indicators leave no doubt that a slowdown in the labor market is underway. Job openings and quits are declining, jobless claims are rising, and many companies have announced hiring freezes or slowdowns. Still, June’s 36-year-high rent CPI number is concerning because rent hikes are sticky and could keep inflation running hot. 

If not now, when? Our expert economists down the hall give us a 30% chance of a recession in the next 12 months and a near-50% probability in the next 24 months. 


This article is for informational purposes only and is not a substitute for individualized professional advice. Individuals should consult their own tax advisor for matters specific to their own taxes and nothing communicated to you herein should be considered tax advice. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of Goldman Sachs Bank USA, Goldman Sachs Group, Inc. or any of their affiliates, subsidiaries or division. Goldman Sachs Bank USA does not provide any financial, economic, legal, accounting, tax or other recommendation in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.  Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA or any its affiliates. Neither Goldman Sachs Bank USA nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.