- Regarding whether a recession is still imminent, much conjecture exists.
- Some analysts claim that the nation is already going through a “richcession,” as opposed to a general contraction that would occur later.
- While the unemployment rate as a whole continues to hover around 50-year lows, layoffs have primarily been restricted to white-collar positions.Even though there have been repeated warnings that a recession is coming, the U.S. economy has performed unexpectedly well.
A robust job market and resilient spending by consumers contributed to the first half of 2023 recording two quarters of positive growth, which is encouraging for the months to come.
A succession of Federal Reserve interest rate rises have not yet resulted in a contraction, and the second quarter’s growth of the gross domestic product, which measures the health of the economy overall, exceeded expectations.
After making recessionary predictions for more than a year, some experts have changed their minds and now support the idea of a “soft landing” or even a “rolling recession,” in which the economy contracts in segments rather than all at once.
However, a “richcession” may be a more accurate term given that white-collar workers have been disproportionately affected by job losses thus far.There could be a ‘richcession’ happening.
Tomas Philipson, a professor of public policy research at the University of Chicago and a former acting chair of the White House Council of Economic Advisers, stated that “in most recessions, unemployment rises more for lower-income groups.”The demand for and earnings of lower-income groups are surpassing those of higher-income groups, despite the fact that we are not yet in a general recession.
According to Challenger, Gray & Christmas, a global relocation and business and executive coaching agency, employers declared plans to cut 481,906 jobs in the first seven months of the year, up 203% from the 159,021 cuts for the same period last year.
Some industries, including banking and technology, have been particularly badly hit, and earlier this summer, a wave of Wall Street layoffs fanned worries that a recession still loomed due to those professional job losses.
However, there are still not enough people to fill unfilled positions in the service sector, and the unemployment rate is still only 3.5%, which is close to a 50-year low.
What consumers should expect from a “richcession”
According to Jacob Channel, senior economist at LendingTree, “Recession is a loaded term.” White-collar employment may not be as plentiful as it was the previous year, but it is still present.Finally, Channel added, “even if white-collar hiring does seem to be declining, that doesn’t necessarily mean that the economy as a whole is struggling.”
The larger economy is performing pretty well, all things considered, despite various obstacles, according to the majority of recent data, he continued.
But regardless of the state of the economy, many Americans are suffering from increasing prices, and the majority have used up their savings and are now relying on credit cards to get by.
According to some reports, financial health is declining. This is more like a “K-shaped recovery” than a “richcession,” according to Greg McBride, chief financial analyst at Bankrate.com.
Although credit card debt is at an all-time high and 61% of individuals live paycheck to paycheck, wealthy Americans aren’t exactly in trouble. He answered, “Those are symptoms of financial stress.
Whatever the final definition of this economic era, McBride argued it would only be in retrospect. “Typically, the recovery is well under way by the time a recession is officially declared.”
