According to some people who lived through it, the Great Depression wasn’t all that bad as long as you had a job. The problem was that many people didn’t have jobs. But there’s a kernel of truth there, and that same observation could also hold true for recessions.
Even if you aren’t affected by a recession through job loss, however, you still may feel the impact of a recession. And you may feel the effects of that recession even before it’s officially been announced as a recession.
Is the US in recession today?
Recessions are always announced after the fact. The 2008 recession, for instance, actually started in December 2007 but was only officially announced by the National Bureau of Economic Research (NBER) in December 2008. That was after stock markets had tanked, Congress bailed out the banking sector, and all but the most die-hard optimists realized that the economy was in bad shape.
If you’re one of those people who senses that the US may already be in recession today, you’re not alone. Many people have already sensed that the US may be nearing recession and so have moved to start protecting their wealth with gold.
But if you still are unsure about whether the US is heading toward recession, here are three indicators that show that the US economy may already be in a recession.
1.) Gross Domestic Income
Most people are familiar with gross domestic product (GDP), but fewer are familiar with gross domestic income (GDI). GDP measures economic output and production, while GDI measures income, i.e. what people take in as they sell their goods, services, and labor.
The two are supposed to be more or less similar in what they measure, but GDI is arguably more accurate when it comes to assessing the real health of the economy in the moment. And at this moment things aren’t looking all that great.
Real GDI has now been negative for two consecutive quarters, and when averaged with real GDP the combined numbers have been negative for four out of the past five quarters. With recession normally being defined as two consecutive quarters of negative growth, this would seem to indicate that the US economy may already be in recession.
These numbers obviously will bear some looking at in the future, but the negative trend doesn’t bode well for the US economy.
2.) Is Inflation Returning?
There are numerous different measures of inflation, with the consumer price index (CPI) being the headline measure that gets the most press. But CPI isn’t the measure that policymakers look to when making their decisions.
The Federal Reserve’s preferred inflation measure right now is PCE (personal consumption expenditures), and more specifically core PCE, PCE excluding food and energy prices. Both PCE figures are rising again, with core PCE increasing from 4.6% year on year to 4.7%, while PCE has increased from 4.2% year on year to 4.4%.
This means that US households are having to spend more money on goods and services, and is arguably a more accurate indicator of inflation’s impact on consumer spending than price indices like CPI. If PCE figures continue to grow next month, or even just stay flat, it could be an indicator that the Fed’s fight against inflation is stalling.
That could mean that the Fed needs to continue hiking interest rates to tackle inflation, something that could further stall the US economy. And if inflation remains stubbornly high and the US enters a recession, the risk of stagflation could increase.
3.) Are Manufacturers Buying Less?
Another indicator of slowing economic activity is core durable goods orders, i.e. orders that exclude big-ticket transportation items like airplanes. These numbers have been relatively flat for the past two years but have started to tick downward, both month on month and year on year. If durable goods orders fall further, it could be an indicator that falling consumer demand is causing manufacturers to pull back on their own purchases.
During the 2008 crisis, durable goods orders took a while to plummet, with a catastrophic decline only coming later in the year. In fact, they actually peaked in April 2008, four months after the recession officially started. So keep an eye on durable goods figures, because further declines could mean that the US is already in recession.
Protect Against Recession
Of course, none of these indicators by themselves are fully indicative of recession. But they’re potential markers that can point to the existence of a recession. By the time most of these statistics show that the economy is in recession, it will have become painfully obvious.
That, of course, means that everyone is going to start heading for the exits all at once, just like they did in 2008. For those who are prepared to ride out a recession, that won’t matter. But how many Americans won’t be prepared?
How many people thought that plunging markets in 2008 were an anomaly, and that things would get back to normal soon? How many thought that markets would recover quickly after 2008 and waited years for their investments to regain value? And how many panicked and sold at the bottom, locking in their losses?
If you’re not prepared for a recession or financial crisis, the sudden appearance of one can understandably be cause for concern. But if you’re prepared, and stick to your plan, you can weather a recession with a little less worry.
Many Americans have already started to try to recession-proof their savings by buying gold. During the same period markets lost more than 50% of their value from 2007 to 2009, gold gained 25%. And gold went on to set new record highs in the coming years.
Those who remember 2008 remember how gold performed, and they’re hoping for a repeat performance during the next recession. Many are choosing to protect their tax-advantaged assets with a gold IRA, while others are choosing to make direct purchases of gold coins or bars.
With over $2 billion in precious metals placements, Goldco has helped thousands of satisfied customers benefit from owning gold. If you want to help protect your hard-earned wealth from the effects of recession, call Goldco today to learn how gold can help you.
Trevor Gerszt is the founder and CEO of Goldco, a precious metals dealer in Los Angeles. For more than 20 years, Trevor has sought out ways to help people build long-term wealth through the security and stability of precious metals and other alternative assets. Goldco is A+ Rated by the Better Business Bureau, a 5-Time INC 500 Winner and has countless 5-Star Reviews for its quality customer service, dependability and strong reputation.
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