My nomination for the most over-worked noun of 2022 is . . . RECESSION. Pundits fear-monger about it constantly. However, there are different types of recession. Know your recession!
Most people confuse the GREAT RECESSION of 2008/9 with normal recessions. It was not! That was a global financial crisis which morphed into a really bad recession. Don’t confuse a financial crisis with a recession!
Officially, only the Bureau of Economic Analysis can determine if there is a recession and only in retrospective. They do not predict a recession and don’t even disclose the criteria beforehand. Among everyday working pundits, they define a recession loosely as two consecutive quarters of decreasing GDP, which we experienced the first half of this year.
Of course, there are other types of recessions. Here are a few:
ROLLING RECESSIONS, where different parts of the country experience recessions at different times. It can even be international with some countries in recession and some not. Economic weakness in one area will often spread.
There are also SECTOR RECESSIONS, where different sectors of the economy suffer and others don’t. For example, the semiconductor sector of the economy has been in a deep recession for almost a year. It is unusual for all sectors to be in recession at the same time. Find the immune sector.
There are EARNINGS RECESSIONS, whereby corporate profits start decreasing. Wall Street is already freaking-out about this for next year.
My favorite is GROWTH RECESSIONS, whereby GDP growth rates decrease — still positive but less so. I don’t need GDP to go negative before I know it is time to be extra careful.
If this is your first recession, relax and take notes, because it will not be your last recession.
Recessions should be respected but not feared . . .