Are we in a Recession Right Now?

Submitted by thejohnwetter t3_zspg26 in wallstreetbets

The answer to this question isn’t so easy. Let’s start by explaining what a recession even is. A recession is typically declared by experts when a nation’s economy experiences two consecutive quarters of negative gross domestic product (GDP). GDP turned negative in the first half of 2022, but rebounded back to positive growth in the third quarter.

  • GDP Q1 2022 being -1.6%
  • GDP Q2 2022 being -0.6%
  • GDP Q3 2022 being 3.2%

By definition we actually just got out of a recession in Q3. So, are we in a recession right now? The simple answer, by definition, is no we are not in a recession. The more complex answer begs the question; Can you still be in a recession even if it doesn’t exactly fit the definition? We think so.

Let’s start with some alarming numbers from the world’s largest firms

Since October we’ve seen

  • Amazon lay off 10,000 employees 
  • Apple freeze hiring
  • Twitter lay off 75% of employees
  • Goldman Sachs lay off 8% of employees
  • Coinbase lay off 18% of employees
  • Intel lay off 20% of employees
  • Meta lay off 13% of employees
  • In total, 150,000+ employees laid off in tech in 2022

If that doesn’t scream be cautious then I don’t know what will.

*Credit to MorningTendies.com*

We’ve heard Coinbase CEO Brian Armstrong, as well as  Jeff Bezos, Elon Musk, and Mark Zuckerberg all say the United States is heading into a recession. These preemptive layoffs feel like the world’s largest companies are preparing for this recession. 

What about the Stock Market?

We’ve seen MASSIVE selloffs this year in the financial markets. Let’s take a look at some of the crazier ones.

YTD performance (at the time of writing this article)

  • S&P 500 is down -19.16%
  • Dow is down -8.87%
  • Nasdaq is down -32.33%
  • Bitcoin is down -64.77%
  • Apple is down -25.72%
  • Tesla is down -65.59%
  • Nvidia is down -45.33%
  • Amazon is down -49.15%
  • Roblox is down -71.59%
  • Meta is down -64.62%
  • Netflix is down -50.12%

We can keep going on and on, but I think you get the point. Stocks have sold off hard. This could be for any number of reasons, but here is some we believe could be the case for this selloff.

  1. Stocks are returning to pre-pandemic, fair valuations
  2. Investors are transitioning to cash positions as the market environment is shaky
  3. Investors are concerned that the Feds rate hiking campaign will push the economy into a recession

What about Recent Economic Data?

Well, it’s mixed.

We’ve seen some good and some bad data recently. Let’s start with the good. 

The Good

  • The CPI report. The CPI report shows inflation rose just 0.1% from the previous month and increased 7.1% from a year ago, below the respective estimates of 0.3% and 7.3%. This shows signs that the Fed is finally starting to get control of the inflation problem.
  • The Consumer Confidence Index. The Conference Board’s Consumer Confidence index came n at 108.3 for December. An increase from the prior month of 101.4. This shows Americans are growing more optimistic about the economy and jobs. 
  • Price of Oil. The price of oil is about $78.44 per barrel. We’ve seen a steady decline in crude oil price since its peak back in June. Whether Americans want to admit it or not, oil is the blood of our economy. Lowering oil prices is essential for everything. The $78.44 number is still elevated compared to historical costs, but it’s far better than the nearly $120 per barrel back in June.

The Bad

  • Rate Hikes. The Fed is raising rates aggressively in order to fight inflation. The latest Fed decision, on 12/14, raised interest rates by 50 basis points. Interest rates are now higher than in 2008. The Federal Reserve also said ongoing rate increases are “likely appropriate”, and that they see rate increases continuing through 2023. These rate hikes are good in the long term as it will help fight inflation, but in the short term there are concerns it could crash the economy into a recession.  
  • Housing Market. The housing market has been on a steady decline from previous record highs and shows no signs of slowing down. Existing-Home Sales fell more than 7% in November, marking the 10th straight month of decline. Sales are down 35.4% YoY and the mortgage demand has hit its lowest since 1997.

So are we in a recession right now?

The question is more complex than a yes or no answer. By definition, no. By the data and current events we just talked about, maybe. It is definitely a time when one should practice being patient and composed.

​

*Credit to MorningTendies.com*

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VisualMod t1_j1930bq wrote

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^^Discord ^^BanBets ^^VoteBot ^^FAQ ^^Leaderboard ^^- ^^Keep_VM_Alive >TL;DR: No, we are not in a recession right now by definition. However, many experts believe we are heading into one and there are many signs that point to a potential recession.

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VisualMod t1_j1930yb wrote

>It's pretty clear that we are heading into a recession. The stock market is crashing, major companies are laying off employees and the housing market is in decline. I think it's only a matter of time before the economy officially enters a recession.

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msmintcar t1_j193lx9 wrote

It would definitely slow down or freeze all the workers trying to unionize or look for better conditions if they thought we were in a recession. Who does it benefit to constantly bring up the threat of a looming recession?

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LongIslandNerd t1_j193y2j wrote

We are 100% in a recession, but no one wants with "official" power wants to say it and cause mass panic. If we are not in a recession we are just feeling the impact of covid, big physical spending, world issues, war, corporate greed all being handed to us on a silver platter as the main course.

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ImNewHerr t1_j19775s wrote

The beatings will continue until you put your McDonald’s apron on.

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KenBalbari t1_j1984b4 wrote

We aren't currently in a recession. GDP Now has Q4 still growing at 2.7%, and the consensus estimates for Q4 are over 1%.

We also really weren't in one earlier this year, by NBER standards. Two quarters of negative GDP is a popular colloquial metric, but not the definition used by experts who study business cycles, for whom a recession is defined as a significant decline in economic activity that is widespread, and lasts more than a few months.

That said, without quibbling over definitions, it is clear that growth in the first half of 2022 had at least slowed to a crawl. In Q2, the weakest quarter, most every metric NBER deems important was within about +/- 1%. That may not meet NBER's definition of a significant decline in activity, but it was a significant slowdown from the overheating economy of Q4 of 2021.

And while the economy may not be in a recession yet now, the declining stock market, falling new home sales, falling corporate profits, and the inverted yield curve are all leading indicators suggesting a potential recession in 2023.

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Future-Back8822 t1_j19999n wrote

Investors, laid off techbros, laid off tech excess and regards are in a recession, normal people with jobs are still chugging along fine

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MicroBadger_ t1_j199kne wrote

> A recession is typically declared by experts when a nation’s economy experiences two consecutive quarters of negative gross domestic product (GDP)

The moment I saw this line, I knew the rest of this wall of text would be complete dog shit. And frankly wasn't disappointed.

Let's start with the 2 negative GDP equals a recession. Look at this and kindly explain how we get a 2-month recession in 2020 if that doesn't even equal one fucking quarter.

Layoffs - You examples are solely tech based which went through a massive boom during covid and now that things have settled down, they realized they over fucking hired and are having to adjust.

Stock market - I get this is WSB but the stock market doesn't equal the general economy. With the increase in rates, decent risk adjusted returns can be found outside of stocks. Not a shock to see capital leave over valued equities.

Final note, I would draw your attention to the U6 rate. Every other recession, that rate is going up before we "Officially" hit a recession and during the recession, it fucking goes parabolic. What's the trend been for 2022? Fucking down.

We could easily enter into a recession in 2023 but it sure as shit hasn't happened yet.

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CatDiscombobulated33 t1_j19eyxg wrote

So signs of a recession occur when over priced techs stocks with valuations based more on speculation than fundamentals start returning to realistic prices and laying off staff?

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Moist_Lunch_5075 t1_j1azb5j wrote

Replying to MicroBadger_ (#1,009,637)

I'm so tired of correcting the "experts define a recession as two quarters of negative GDP" bullshit. LOL

I especially hate the "the white house changed the definition" idiocy.

A recession has been a broad-based decline across the economy for a long time. The NBER didn't change the definition for this drawdown. It was this way when I started taking econ courses for my degree 25 years ago. I'd say I'm having a Mandela Effect moment, but the NBER's definition remains that it requires a broad-based economic pullback for a recession.

The thing people say to defend this is "GDP IS the economy, dummy" which is bullshit. A macro score of overall productivity? Sure... a sign of overall economic weakness? GDP can decline because of cyclical events as certain sectors of the economy retract, but others can have strength at the same time, which is pretty much what we saw during the two negative quarters this year.

We tell people to look for two quarters because it's a lot easier than explaining what a broad-based pullback in economic activity is and, frankly, people glaze over and often don't get it... and GDP usually goes up. The GDP rule is an indicator of potential coming weakness. Just an indicator, not a definition of a recession... but somehow this BS became a truism.

Weirdly, you can also have a recession with positive GDP once you've entered the decline because GDP growth/retraction is inherently relative... this is the danger of just using GDP, and why it's important not to declare one until you have solid data.

The whole exercise feels silly to me, too. Like... what's the use of trying to pinpoint whether we're in a recession right?

Do we need to do that to consider risk to equities? I mean, yes, it's important to keep an eye on expectations around a recession... but we know they're there. Anyone who can read a chart (which I guess lots of people on this sub can't, so there's that LOL) knows the market's in a downtrend experiencing heavy risk of potential capitulation... and the truth is no matter what we guess, whether we enter a recession this year or not or have already started one, the hedge is basically the same. The risk is basically the same entering into the year... and when that risk level changes, it's gonna be based on information we don't have right now.

So like... what's the fuckin' point of trying to call a recession early besides the political axes some people are grinding?

Anyway... just wrote that to supplement your post.

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OlafTheDestroyer2 t1_j1cquic wrote

When the people of the future discover the lost achieves of Reddit, they will use this post to explain why civilization collapsed.

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