If you’ve been feeling like your bank account doesn’t match the increased costs of living, you aren’t alone. Whether the government or media wants to talk about it or not, the United States is on the brink of a recession, and it is being felt by people across the country.
Which brings us to the question: Why are we being gaslit into thinking economic shortcomings are the fault of the people and not a sign of bigger issues?
Below we will go over what exactly a recession is, if we are in a recession right now, and a few ways we can take back some economic control.
What is a Recession?
Before getting into the details, it’s important to cover the basics, starting with what a recession technically is. The classically accepted rule for determining a recession is “two consecutive quarters of decline in a country’s Gross Domestic Product (GDP).”
But, the National Bureau of Economic Research (NBER — the agency that makes the official decision) leaves more room for judgment. They define it as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
Economists also look at indicators such as industrial production and retail sales (among other things) to mark the start and end of a recession.
It should be noted that when not in a recession, the economy is considered to be in a state of expansion. This is worth knowing because recessions serve as corrective phases in the business cycle.
So, Are We in a Recession?
Outside of using the rule on GDP decline, determining if we are in a recession often comes down to hindsight. Because there is no clear-cut formula in use, it is hard to accurately claim whether we are or are not actively in a recession. So, let’s take a look at our current situation.
The Official Word
Since the NBER hasn’t officially declared a recession, the technical answer is no, we are not in a recession. But, the real answer is more complicated. Here’s why.
The United States just saw its second quarter in a row of negative growth, which has marked a recession every time since 1948. So, why is it different this time? Some feel it isn’t, and the American people are having the goalposts moved on them. But, it’s worth listening to the logic being used.
The NBER’s reasoning for not declaring a recession is that the job market is still making a strong push. In July, unemployment fell to 3.5%, which matches pre-pandemic rates and is historically a strong number. While having low unemployment rates is inarguably a good thing, the NBER seems to be ignoring the financial reality many are dealing with in this country — people can’t afford things.
Although we’re being told there’s no recession and the numbers are good, the reality is that the American people are being gaslit. The annual inflation rate as of July is at 9.1% (the highest it’s been since 1981). Supply chain issues are rampant (the worst they’ve been since 1972), and these issues will probably get worse in the months to come.
More and more people are struggling to put food on the table or afford housing. And they are not in these situations because of bad spending habits or other personal failures. No matter what the media says, the truth is the economic system is failing, and there is very little individuals can do to protect themselves from it.
What Can You Do About It?
So, you know it’s not all your fault, but what can you do about it? Let’s take a look.
- Remember how unemployment rates are low? That can be used to your advantage. Ask for a raise, and feel free to cite things such as your performance or even high inflation. With so few people needing a job, replacing workers isn’t very easy. You can find more tips for how to ask for a raise in this article I published a few months ago about the Great Resignation and burnout.
- Find out where inflation is impacting you. Inflation affects industries differently. So while there are some things that you should hold off on purchasing if you can (cars for example), there are other places where your money still holds its value.
- Beware of “shrinkflation.” You’ve probably noticed that many things have gone up in price, but have you paid close attention to the items that haven’t? Shrinkflation is a sneaky strategy companies use where they simply reduce the amount of product you get without changing the price. Next time you’re at the store, pay attention to how many rolls of toilet paper are in the package, and apply the same level of awareness to all your items.
- Is your car lease ending? Great! Used car prices are incredibly high right now, but if you signed a lease before the current inflation rates, that means you’re likely getting a discount on the price. Even if you don’t really want to keep the car, look into its value and consider buying it at your locked-in pre-inflation price. Then, you could sell it yourself for a profit on the difference.
- Limit your lifestyle creep. This one can be a bit tougher, considering you feel like you have to spend more because things cost more. But if you can manage to keep your spending consistent with how it was before inflation exploded, you’ll be setting yourself up for success going forward.
- Take care of yourself. The toll that financial stress can take on you is real. Check out my 10 tips for dealing with money anxiety to learn more.
While all these numbers are helpful, they really just back up what everyone is feeling. The economy isn’t in a good place for regular people. Though the government and media seem to be content telling us everything is A-okay, people should know that the economic issues they’re dealing with aren’t necessarily their fault.
Arming yourself with the knowledge that your financial struggles are not 100% your fault can go a long way toward improving your situation. So continue to take care of yourself, cut back where you can, and use your voice (and vote) to demand change.
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