Is the US Economy Faltering? 7 Signs That a Recession is Coming
Thursday was another day filled with red on the stock market. Interest rates are still high, and there is no sign of them coming down yet. People speculate there could be a cut soon, but that has been the speculation since last year. The Dow ended the day down 1.2%, with the S&P 500 down 1.4% and the Nasdaq down 2.3%. So, is it time to worry about a recession?
Recession Doom and Gloom
The talks of a recession have been happening for almost a year. People were talking about it in August of last year, and have since thought that the economy is doing poorly. Inflation is still much higher than people expected even though a record number of people are traveling this summer. Either their bank accounts are more extensive than they say, or maybe the recession talks are just talk.
Unemployment Rates
Unemployment is the lowest in years, with wage growth over 4% in 2024 alone. On the flip side, a significant number of people claimed unemployment benefits just last week. So could that be one of the first signs that the economy is faltering? When is the recession coming?
Here are few signs to look out for if a recession hits.
1. Two Consecutive Quarters of Negative GDP
A recession is a significant event that can affect all of us. That means jobs are lost, houses foreclosed on, and say goodbye to fun vacations to Europe. A recession is an economic event that can last months to a few years. The last big recession would be the Great Financial Crisis of 2008. We had a slight dip in 2020, but during Covid, many people couldn’t work or spend money. Let’s keep looking to see if businesses lose money during these quarterly reports
2. Job Losses
One thing that could be upsetting to people is that there were major claims of unemployment in the last week. It was reported in early August that unemployment benefits rose to 249,000 last week, hitting the highest level since August of 2023. With recessions, job losses start to come and companies start to dip in their stock prices. People cannot spend money, and the economy could falter.
3. Consumer Debt Continues to Grow
The Federal Reserve Bank of New York reported that American consumer debt hit an all-time high of $17.3 trillion. It has risen to all-time highs. People continue to spend without stopping, and when the money from jobs comes to a halt, bye-bye economy.
4. The Federal Reserve Bank Cutting Rates
In order to keep a recession from happening the Federal Reserve will tend to lower rates to help prompt more money into supply and allow companies to borrow more. More money for companies to have the more likely they keep staff without significant layoffs. It is a delicate balance because who knows when a recession can hit. These things can be fear induced by media and all other external factors.
5. Companies Suspending Dividends
Some investors depend on the dividends that companies put out. AT&T used to have a high dividend percentage until they were running on cash and needed to cut it. Many companies want to be a part of the Dividend Aristocrats and keep increasing yearly, but sometimes money talks. Intel cut its dividend yesterday, and it is a red flag for this chip company.Does this mean a recession is on its way? It could be with people depending on those dividends, and now, it is cut. It just means people will need to tighten their belts a bit more.
6. Companies Blame On External Factors
This may not be a sign of a recession, but companies like Amazon blame people’s attention span on slower sales. Prime Day had its highest day ever, but Amazon is still not where it wants to be in sales. They blame the Olympics and Trump from taking away their customers. Social media could lead to less productivity and less attention to consumerism. The problem is that people are spending, which means they are holding onto more of their money.
7. Big Companies Losing Big Market Shares
The stock market has been up and down for the last two weeks. Tech and chip stocks have seen a deep decline that could be related to political speeches over Taiwan or the fact that they were overvalued. Companies like Google and Microsoft did not hit their growth targets, and that could be a factor in the losses seen in the stock market.
Is a Recession Coming?
Many people attribute just a little bit of bad news to the recession. Fear can spread like wildfire and make people do erratic things, causing even more fear. Hope and excitement do the same thing, but slower. Tesla had a second quarter of poor sales, which has sparked much fear with its volatile stock.
Time To Prepare
It could be a good thing to have a recession, which means prices could come down and stock prices could be cheaper. Recessions are also full of economic loss with many people. People who depend on paychecks, and those who have mortgages and debt to pay off. So, as these fears of recession come crawling through the interweb, beware of the signs and take necessary precautions, such as having an emergency fund to help you in need.
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