New numbers from the U.S. Bureau of Economic Analysis show the nation’s Gross Domestic Product decreased for the second consecutive quarter this year. During the first quarter, it decreased at an annual rate of 1.6%. During the second quarter, it fell at an annual rate of 0.9%.
A shrinking GDP can indicate a recession is coming, but that’s not the only factor taken into consideration.
The National Bureau of Economic Research makes the final call on whether there is a recession or not, and it has not said the country is in a recession. Stephen Bannister, an associate professor in the Department of Economics at the University of Utah, said he doubts the NBER will say the U.S. is in a recession.
“The strong signals, consumer spending, employment levels, are still very positive. Hard to see a recession coming,” Bannister said.
The positives
In Thursday’s GDP report, there was a 7.1% increase in personal consumption expenditures, or how much consumers spend.
As for employment levels, unemployment claims are down and the U.S. still has a strong labor market.
“It’s just difficult for me to say at this point there’s going to be a recession starting any time this third quarter of 2022,” Bannister said.
Things are looking good for Utah as well.
In his analysis of the June 2022 employment report, Utah Department of Workforce Services Chief Economist Mark Knold said the state is at the most favorable level it can be. It is producing jobs at an above-average pace and unemployment is historically low.
“For Utah, there is a lot of room for economic slowing before such weakening moves into levels that become painful and injurious upon the economy,” Knold said.
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However, he said future recessions may not have as much disruption to the labor market as they have in the past. That’s because the U.S. is in a unique situation where, for the first time, there are more workers aging out of the labor force than aging in.
Small business worries
Despite not technically being in a recession, some Utah small business owners are worried — like Dolores Medina, the general manager of El Farol Mexican Restaurant.
“My fear is that this is going to be like the recession years ago, in 2008,” Medina said. “The weekly customers trickled down to be monthly customers and we sacrificed our personal finances to keep the business going.”
Even before there was talk about a looming recession this time, Medina said she has been trying to pay off as many bills as possible, in the hopes of making more funds available. But even then, that won’t solve everything for a small business.
“If you don’t have customers coming through your front doors, then you’re screwed, you know?” Medina said.
June sales for the restaurant already declined by $4,000, she said, and July isn’t looking much better.
“We’re still getting customers coming in, but it’s worrisome. $4,000 to small business is like paying rent, or $4,000 is like half of my payroll,” Medina noted.
Things will be clearer when the Bureau of Economic Analysis revises the second quarter GDP data at the end of August.