SAVINGS, BUSINESS REOPENINGS ARE KEY TO PREVENTING A SEVERE RECESSION
Hub staff report
The U.S. economy may have already entered a recession, but it may not be as dire as what some economists have predicted, even after the Federal Reserve raised interest rates on July 27. The increase marked the third interest rate hike aimed at curbing inflation, bringing the policy rate to a range of 2.25% percent to 2.5%—the highest level since 2018.
A recession, according to Alessandro Rebucci, associate professor at the Johns Hopkins Carey Business School, is defined as two consecutive quarters of negative gross domestic product growth. U.S. GDP was negative in the first quarter of 2022 because of falling exports, particularly to China, and it has decelerated further, according to the Atlanta Fed GDP Nowcast.
Still, Rebucci is optimistic that the interest rate hike, a slowing Chinese economy, and the troubled Eurozone economies will not drag the U.S. economy down; rather, he's expecting that the U.S. will experience a "mild recession."
Good news
Rebucci says there are at least three reasons to be optimistic about the U.S. economy.
Consumers are drivers of the U.S. economy, and they are still spending. Rebucci adds that households still have a $2.5 trillion cushion of savings, accumulated during the height of the pandemic. According to the U.S. Bureau of Labor Statistics, the personal saving rate averaged 7.5% from 2015-2019, but grew to roughly 15% during the
