There are two types of discourse about the recession right now.
- Are we there yet?
- What recession?
Both are tone-deaf. For too many people, whether or not we’re in a recession is beside the point. Fixating on this ignores the on-the-ground pain, caution, and uncertainty that have been building for months, even years, and are now reaching a critical peak.
Food pantries are reporting record demand. There’s an affordable housing crisis across the country. A new ABC News/Ipsos poll finds that more than two-thirds of Americans think the economy is getting worse, the highest measure since 2008. And yet I’ve noticed news of this nature follows a predictable pattern, especially on social media: Inevitably, the conversation turns to how the state of the economy affects President Biden’s approval ratings. Then come dozens of replies saying the media fuel public discontent and things are actually going great, thank you. And finally, the declarations of “there is no recession in [insert industry]” and that 2022 has brought record sales of concerts, real estate, even Ferraris.
What recession?
Are we there yet?
How quickly we’ve forgotten the compassion that defined our initial reaction to the pandemic-induced recession of 2020, from Covid relief funds to stimulus checks to the way communities organized mutual aid and neighbors checked in on one another. Whether we are technically in a recession—defined as the contraction of a business cycle and officially declared by a bureau of economists—matters less than who has already been feeling the pinch for some time.
Recessions always hit lower-income families harder than higher-income families. What seems different this time is that a downturn joins an assault of other issues hurting households at the bottom of the income pyramid: inflation, lack of affordable housing, low wages, long Covid.
This moment feels like something we haven’t really seen before. So to make sense of it, I asked a bunch of really smart people some really dumb questions.
Ok, fine. Are we in a recession?
For an answer, I turned to Cecilia Rouse, the chairwoman of the Council of Economic Advisers in the Biden administration. Notably, she is the 30th chair and the first African-American to hold the position. She says we need a much more “holistic” approach to defining a recession, rather than relying on the benchmark of two quarters of negative economic growth.
“If we look at several of the indicators that economists look at, they are not suggestive of a recession,” she says, citing a CEA blog post from last month: “Both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data—including the labor market, consumer and business spending, industrial production, and incomes.”
“We saw this again with job growth in July, which came in at more than 500,000 jobs,” she adds.
I asked Miles Kimball, an economics professor at the University of Colorado Boulder, the same question. Are we in a recession?
“If not, we soon will be,” he says. “The Fed is appropriately engineering a recession to bring inflation down.”
While experts might not agree on whither recession, there’s one area where they seem to concur: It’s a tight labor market. How to explain this?
I asked Glassdoor’s lead economist Daniel Zhao for his thoughts.
“The strength of the labor market helps tamp down recession fears. It would be extremely unusual to be in a recession where we’re still adding hundreds of thousands of jobs on a monthly basis,” he says. “If the economy does continue to slow and drag down consumer demand, then that will likely have an impact on the labor market, but it may take time for that impact to show up.”
But, he adds, “the question of whether we’re in a recession right now or not is semantics. Whether we’re in a recession or not doesn’t change the facts on the ground. Lower-income Americans have felt the brunt of the pandemic and high inflation now over the last two years. And if a recession does begin, rising unemployment will likely hit lower-income Americans harder.”
Unquestionably, there seems to be so much widespread pain in the economy. Why?
Kimball points to a fact we’ve all heard (and said) plenty over the last two-plus years: These are unprecedented times. “Covid has had pretty long-lasting effects reducing the workforce,” he says. “Labor participation has been lower than the Federal Reserve thought it would be. There’s just a bunch of things they didn’t know. People who are saying Covid isn’t a long-run economic danger. … it’s not so simple.”
Rouse echoed that: “It is important to remember what is going on in this economy: a restart after a global pandemic and resulting recession, and now the Russian invasion of Ukraine, which has driven up food and energy prices.”
Why are we seeing layoffs if the labor market is so tight?
Alongside the recent wave of startup layoffs, several major corporations have let workers go in recent months, including Verizon and T-Mobile, Goldman Sachs, Walmart, Oracle, and Gannett. But Brian Brackeen, general partner at Lightship Capital, a venture-capital firm in the Midwest, cautions against reading too much into them. He tells me: “The layoffs you see are sector-focused. The economy has become so large that pockets can have microeconomic instability while the macroeconomic picture is positive.”
In technology, where layoffs have been especially widespread lately, “investors are no longer plowing money into bad Silicon Valley ‘unicorns’ because of the markdowns in the private and public markets. The lack of fast and easy capital has made startup CEOs lower their costs and lay off staff,” Brackeen explains. “At the same time, a healthcare CEO can’t hire fast enough, and has seen little impact to their business by things like interest rates or a lack of venture capital.”
And layoffs may not be the right metric to pay attention to, anyway. “Layoffs are dramatic and easy to point to. What causes most of the big rises in unemployment is a reduction in hiring,” Kimball says. “The journalism is starting to improve on that, where rather than talking about layoffs, we talk about the reductions in vacancies and a climate of more cautious hiring.”
Where can people in need turn for help?
“While there are the programs that many people have been focused on over the last few years, such as unemployment insurance, there are others that have not received as much attention,” Rouse says. Here are the ones she mentions:
Supplemental Nutrition Assistance Program (SNAP), which provides families with money for groceries each month, is notable, she says, for recently undergoing “the largest permanent increase in benefits in the program’s history, raising average benefits more than 25 percent above pre-pandemic levels.”
Affordable Connectivity Program (ACP), a provision of the Bipartisan Infrastructure Law passed last year, gives eligible households a discount of $30 per month on their internet bills and a one-time discount of up to $100 to purchase a laptop, desktop computer, or tablet.
Low Income Home Energy Assistance Program (LIHEAP) helps low-income families manage costs associated with home energy bills, energy crises, weatherization, and energy-related minor home repairs.
What could have prevented this pain? What are we learning?
We are turning to economists now to understand this maybe-recession, but in some ways, we’re too late. Kimball wishes he and his colleagues had been as popular for the last few years: “I wish economists had been brought into pandemic policy more,” he says. “What they would have said is to spend less on fixing the economy and spend more on fixing the pandemic … preventing the spread of the disease itself.”
I ask if he’s referring to the windows in my kids’ schools not working and the lack of ventilation in so many buildings.
“Sure, or maybe lots of Paxlovid sooner,” Kimball says. “By now there should have been a randomized trial not just for high-risk people, but for everybody. We should be spending a lot more money on the science.”