When it comes to a recession, technically speaking, economics professor Kishore Kulkarni at Metropolitan State University of Denver said we’re already there.
“The technical definition of recession is to have a declining GDP (gross domestic product) in two consecutive quarters, and we did that in July,” Kulkarni said. “I think in the first and second quarter of 2022, our GDP declined by 0.6% and to me, that is a very minor decline in GDP even if it does fit the definition of recession.”
Of course, we won’t know if the GDP downward trend will continue through a third consecutive quarter until later in the fall. That being said, there are other key metrics economists look at to gauge how strong an economy is.
Kulkarni said any unemployment below 4% is certainly good news when talking about the economy.
Wage growth isn’t as aggressive as it was in the beginning of the pandemic, with rates slowing since the start of 2022. According to the latest jobs report, wages only grew 0.3% across the country from July to August.
“That is a sign that wages have already reached to a very high level and there is not much room to go any further, at least in the labor market, in the short duration,” Kulkarni said.
A key metric in how healthy the economy is going into the fall will be revealed on Sept. 13, when the latest Consumer Price Index report comes out to measure inflation. For the first time in two years, inflation fell from month to month in July when compared to August, however, inflation compared to last year is still near 9% nationwide.
“If wages are stabilizing, in a way it is good news because higher wages will make a push for higher prices and as you know, in Colorado and also in the Denver area, prices are increasing much faster than the national average,” Kulkarni said.
The Federal Reserve Board is set to meet later this month to decide on yet another hike in interest rates. It remains to be seen just how high the Fed will hike rates, and the inflation report in mid-September could be a big factor in that decision.