What is a recession?
A recession is seen as an economic decline in activity for a period of time ranging from months to years. It is measured by viewing the GDP (gross domestic product), unemployment rates, and a myriad of other factors. A recession should not be considered completely negative, as a recession is an unavoidable part of business and the economy. The rapid expansion that comes with competition and business will inevitably lead to a recession. The National Bureau of Economic Research( NBER) aligns with this idea. There is no solid definition of a recession or single metric that can predict or account for the recession, but generally, it is decided that we are in a recession when GDP growth is negative for two consecutive quarters.
How likely are we to enter a recession?
Most economic models and economists view a 2024 recession as highly unlikely. Although there has been a poor job market and signs of inflation, the overall growth in GDP has remained relatively high, highlighting the fact that the economy is still growing. Another determiner of a recession is a decline in the stock market, and currently, the opposite is occurring. During 2024, the economy may slow down and eventually lead to a recession in 2025, especially with ongoing conflicts and tensions with foreign governments.
What does it mean for you?
Though officially we have not entered a recession yet, if we did, what does it even mean? On a larger scale, many businesses will fail due to reduced income and, in turn, fewer jobs and lower wages. In a recession, growth is nonexistent for many companies, leading to more layoffs and budget cuts. To prepare for a recession, having emergency savings in case of an unpredicted job loss is one of the most important things, even if it wasn’t a recession. For many, inflation will have a major impact as it will lead to higher prices for consumer goods and higher interest rates on debt. Major expenses like homes will be practically impossible to pay for as interest rates are too high. In addition, the stock market will become very volatile and unpredictable.
The Short Answer
There is a possibility of a recession within the next year, but a recession is practically inevitable if economic growth is desired. In short, you most likely should not be worried, but spending your time to form savings and aim to find a stable job is important, not only during the recession but out of it.