Common Sen$e: What’s This Talk of Recession?

ART WOOD

You can’t open your computer without hearing the “r-word” right now. Some say we can expect to see a recession in 2023 and 2024. Some say we are in a recession now, and some say that they don’t expect a recession anytime soon. A lot of people see the drop in the stock market and say that is indicative of a recession. My focus in this article is really just to help explain what a recession is and give you some things to think about.

Let’s look at the definition of what a recession is. A recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in gross domestic product (GDP) in two successive quarters. After the crushing blow of COVID, everyone was trying to predict the recovery, and no one expected the “v-shaped” recovery we have had. Economic conditions improved at a historic, and unsustainable, level which has led to historically low employment and record-breaking inflation. That being said, we had our first reduction in GDP in the first quarter of 2022; GDP slowed by 1.4% versus the fourth quarter of 2021. By definition, if the second quarter of 2022 has another GDP reduction of, then we will officially be in a recession.

A lot of people look at the volatility and 20% decline of the stock market as further signs of a recession, but that isn’t necessarily true. We can certainly call it a bear market (loss of 20% or more), but you can have a bear market and not be in a recession. A bear market is more like a symptom of recession.

The Feds point to the strong labor market and insist that we are not in a recession. There is some truth in that. As long as there are more jobs than there are workers, then typically the threat of a recession is minimal. There may never have been a better time to be looking for a job than now, as we are seeing record low unemployment and rising wages. That being said, we are seeing unemployment claims start to tick back up.

So, what do I think? I would say we are NOT in a recession yet, but I DO think we will see one in the next six to eighteen months. The big question is more about what it will look like. As I have written before, most people default to the most recent Great Recession, and assume property values will tank. I certainly don’t think we will see that. My prediction is that it will be more similar to the dot.com bubble, when so many tech companies were so over-leveraged and worth billions, yet had never made a profit.

I guess time will tell how this will all turn out, when we can look in the rearview mirror to see where we have come. My advice is to be educated. Keep your finger on the pulse of the market. Read those articles that pop up in your news feed. Lastly, as I have always said, surround yourself with a good team that can help you weather any economic storm, no matter how big or how small. One thing is for sure...this too will pass!

ART WOOD (NMLS #118234) is the branch manager of The Art Wood Mortgage Team of Goldwater Bank, located at 2341 Main Street in downtown Tucker. “Tucker’s Mortgage Guy” for sixteen years, he is a former Tucker Tiger (Class of ’92), and co-founder and organizer of Taste of Tucker. Family guy, community guy, and definitely not your typical mortgage guy - it’s all that he does that makes Art Wood who he is. Contact him at 678.534.5834 or art.wood@goldwaterbank.com.