Aside from the fast-approaching election, the predominant topic of conversation in the country is the sagging economy. Few doubt it has suffered a serious blow in the past few months.
Though no one is immune to an economic downturn, not everyone has felt the impact quite like the middle class. The finances of middle class households are crippled by the economy as more and more people lose their jobs. The United States is not in a recession, but it is tightening its purse strings.
A recession is defined as two or more quarters — about six months — of decline, which we haven’t reached yet. The warning signs of a recession, however, are present.
For those who doubt that our economy is in turmoil, I can illustrate four examples of how Americans can recognize an impending recession: a dismal job report, reduced consumer spending, the price of oil at record highs and the price of goods on the rise.
The dismal job report is a good indication of the bad that may befall us. The U.S. Department of Labor states that 159,000 Americans lost their jobs in September alone. That brings the total to 760,000 jobs lost this year, a sure-fire sign that the economy has taken a turn for the worse. Washington has heard the cry of the poor and Speaker Nancy Pelosi said that “nine straight months of job losses is a painful verdict on the economic mismanagement of the last eight years.” Such statements typify the way Americans feel.
Consumer spending is in sharp decline. The slowdown in the growth of consumer spending is worrisome, as it serves as a good indication of a coming recession. Many Americans are in credit card debt and have seen the value of their homes plummet.
Another cause for concern is the price of oil. Oil prices have spiked to record levels. Over the summer, the price of oil reached an all-time high of nearly $150 per barrel. As the market closed Friday, the price of a barrel of oil dropped to $78. This decrease will provide a respite of sorts for Americans overwhelmed by increasing prices and stagnant wages. The decrease will be short-lived, though, likely ending once the economic bailout takes effect.
A fourth reason to believe a recession is imminent is the price of goods. By now, most consumers have noticed the increase in prices of everything from milk to computers. It is no secret that Americans are having great difficulty keeping pace with these soaring expenses.
The U.S. is not in a recession, but it is dangerously close.
Recessions are part of a normal economic cycle. However, the country is in danger of a full-blown recession during the next six to eight months while the housing market bottoms out.
It is a good idea to watch your finances closely when a recession is imminent, but being too cautious places the burden on other consumers.
So, be confident. It’s said that people who are confident about the economy tend to spend more. Don’t be reckless. Make a budget and stick to it. Just don’t be so afraid of running out of money that you start stuffing cash in your mattress and off of ramen noodles.
There are three signs that could demonstrate a recession has been avoided: an increase in consumer spending, a decrease in unemployment claims and the rebounding of the stock market. If these signs occur, we have dodged a depression.
Ryan Blaney is a senior majoring in English.