Everyone loves a recession… wait, no – that’s recess. Everyone hates a recession! In simple language, a recession is two consecutive quarters of economic slowing. And while we can all suspect we’re in one, there’s no way to confirm it before it’s too late.
The commonly agreed upon definition of a recession is two consecutive quarters with a decline in GDP, but the symptoms are much further reaching. According to the National Bureau of Economic Research (NBER), there are a variety of indicators that must be considered:
Decline in GDP – As displayed in the chart above, we’re already halfway there.
Decline in real income – According to the latest Real Earnings Summary, earnings decreased by 1.0% from May to June of this year.
Rise in unemployment – The Employment Situation report has come in with an unemployment rate of 3.6%, remaining unchanged since March of this year. This is the lowest rate since February of 2020, which unfortunately leaves room for this number to rise.
Stagnation of industrial production and retail sales – The U.S. Census Bureau reported a decrease of 0.3% in sales for retail and food services from April to May. Numbers for June will be released tomorrow at 8:30AM EDT.
Decline in Consumer Spending – Personal consumption expenditures (PCE) increased by 0.2% in May, edging in a very slight increase. The next release, revealing June’s numbers, is scheduled for July 29th at 8:30AM EDT.
CP Ay Ay Ay!
There’s a lot of attention being paid to the Consumer Price Index (CPI). CPI is the measure of the average change over time in prices paid by urban consumers for a market basket of consumer goods. In other words, it measures inflation.
CPI was released yesterday, coming in at 9.1%. This is the highest it has been since 1981.
Higher interest rates encourage saving and discourage borrowing and, therefore, spending. This doesn’t bode well for the established criteria for assessing recession chances.
How to Prosper in Poverty
Dollar Cost Average – This strategy performs best when prices are lower. In a recession, the demand for luxury and risk-on assets is low, resulting in lower prices. Take the time to research and implement a responsible DCA strategy.
Learn – It’s not the sexy answer you want, but it pops up over and over again for good reason. Now is the time to prepare yourself to take advantage of future opportunities. Working hard now will have everyone calling you “lucky” next bull run.
Trim expenses – A recession is the perfect time to live within your means, lambo be damned. Cut unnecessary costs and finally get around to canceling that streaming subscription.
Get in the habit – Start checking government reports. Sure, they’re dryer than British humour, but just by reading this article, you’re well on your way to becoming the “resident expert” around the office everyone comes to when COLA raises pop up.
Earn passive income on stablecoins – This strategy has become riskier in a post-UST world, but lower risk opportunities like Maple Finance still present some feasible strategies.
Sufficiently motivated? Good. Here’s how to get ahead:
