U.S. economy in relatively strong shape, UCSB economist says in Ventura
The U.S. economy is not in a recession and if one is coming soon we’re well-positioned to withstand it with minimal damage, UC Santa Barbara economist Peter Rupert said during a Ventura Chamber of Commerce event Nov. 9.
Rupert is a professor of economics and the director of the UCSB Economic Forecast Project. There is no formal definition of what makes a recession, he said in Ventura; it’s a judgment call by the National Bureau of Economic Research. One common definition of a recession is two consecutive quarters of negative growth in gross domestic product.
The United States economy did experience that in the first two quarters of 2022, Rupert said, but the second quarter was a small decline, just 0.6% year over year, and we’ve already recovered with 2.6% economic growth in the third quarter.
Rupert said the U.S. economy doesn’t meet the other criteria that are usually present in a recession, like high unemployment or high debt ratios for households and businesses. Unemployment is historically low and household and corporate balance sheets are much stronger than they were in the leadup to the Great Recession in 2008.
“The labor market is as strong as we’ve ever seen in the United States,” Rupert said. “It’s crazy how strong the labor market is.”
Inflation is a problem, Rupert said, but it already seems to have peaked, and it can be brought down further by tools at the Federal Reserve’s disposal.
The issue of whether a recession is coming is bit of a trick question, Rupert said, because there’s always one coming eventually. But there doesn’t seem to be one on the immediate horizon, unless it comes about through a self-fulfilling prophecy. And in comparative terms, the U.S. economy is much stronger than that of the most of the world, where inflation is running much higher and many countries are in full-fledged recession.
“The data is not telling us we’re in a recession,” Rupert said. “My biggest fear is you guys read the newspaper and watch TV, and you hear people say we’re going into a recession … so you pull back on consumption. When you do that, it looks like we’re in a recession because consumption fell and GDP falls.”