Is an economic recession coming? It’s already here. GDP growth is lower than inflation. Now there are a lot of different ways to incorporate inflation into GDP, calculate inflation, and so on. Some may say the inflation numbers aren’t accurate. Some would say we are already in recession.
We agree. However, it’s not official until the Federal reserve says so. Here’s why an economic recession is coming.
GDP Growth or Decline
Gross domestic product, or what a country produces, has slowed down a great deal. Wages have struggled to keep up with costs. Are we making anything amazing? Is productivity growing? Any great works that are assets?
Inflation Rate and Recessions
While inflation has cooled down a bit recently, when compounded over the last 3 years it’s a lot. We’re looking at about a 30% price increase across the board since 2020.
source: tradingeconomics.com
As the inflation rate rises for basic goods like food and clothing, less money is available to invest in infrastructure, tooling, training, or services like vacationing.
Population Growth and the Economy
Common sense would dictate if you have more people active in the economy, then you have more economic output. While the United States and worldwide population is continuing to grow, birthrates are on the decline. How that interacts with the economy is multifaceted. Lucky for you, ScrubMoney is all knowing and able to explain these things in a simple manner.
Population growth and the effect on economy is delayed, as in America, forced child labor is frowned upon. Worldwide, however, this is still an issue for some, with kids mining the earth for cellphone batteries. The sooner you can enter the workforce, the sooner you can add to (produce) or support (service jobs) the economy.
Service jobs add to the efficiency of production jobs; manufacturing and physical labor build things that can be calculated. Infrastructure such as buildings and bridges increase the efficiency of our economy. They become assets that can be borrowed off of such as housing, factories, roads.
Multiply that by the productivity of the worker age by specific industry, or other aggregated work demographic.
Political Division, War and the Economy
Fighting solves nothing. It creates nothing but waste. Right now, and in any recession, people and politicians are fighting. This is seen in families breaking up, Government inaction, protests, courtroom conflict – all create nothing. Right now, family courts are in contention – and families are suffering because of it, which makes them less productive.
Why do people fight? Because they don’t feel heard or recognized. They no longer go feel it is beneficial to continue in the manner that they have been. Budgets don’t ass, projects get dropped, and society as a whole becomes less effective.
Over-Leveraged Banks
Banks make money by loaning out money at an interest rate. They are able to loan money out at multiples of their cash deposits reserves.
Most of these loans are made for mortgages and car loans – which values are inflated.
Job Market and the Economy
The job market is deeply connected to the economy and recessions. Wages and unemployment. Wages aren’t keeping up with inflation, which creates a troubling issue – and a shrinking economy.
Unemployment levels have remained low – but don’t count long term unemployment and under employment. They count people that qualify for unemployment and file for it. Everyone else is off the map. Another reason that employers are having a hard time filling positions is because they pay to little for positions – because employees are expensive.
Inflation, Jobs and House Prices Over Last 50 Years
House prices have grown at over 8 times the rate of inflation since 1975, according to the numbers in this historical document. This is from a family of 8 with one worker – was able to afford a house and the kids.
We are in a recession now – have been for years. I am, however, hopeful that we can get out of it if we use technology and our government to empower and connect people.
Don’t you?
