Are we in a recession? YES

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It’s decided. GDP dropped an annualized 0.9% in April to June period.

And as annualized growth in Q1 contracted 1.6%, meaning the U.S. is officially in a recession.

Snapshot: “Recession” has become a charged term in recent weeks, with the phrase being traditionally identified as two consecutive quarters of negative economic growth. While that may be a technical definition (and the one that’s possibly more important to the markets), the official pronouncement boils down to a team of eight economists chosen by the National Bureau of Economic Research. Called the “Business Cycle Dating Committee,” the group has been responsible for identifying recessions, and has set the dates of peaks and troughs of the U.S. economy since 1978.

The funny thing is, that the committee generally waits a while after a recession has begun to officially pronounce it, and on occasion, even after it is already over. In the meantime, inflation is running at more than four times the Fed’s 2% target, while many companies have already frozen hiring and higher borrowing costs are expected to slow investment. Industrial production additionally fell in June, while personal consumption data has triggered a whole host of gloomy forecasts.

Interesting times: Since the end of WWII, a recession has never been declared without a loss of employment (hundreds of thousands of jobs in the U.S. are currently being added every month, while the unemployment rate has fallen to 3.6%, from 4% in January). That has some economists warning of a milder “growth recession,” though the market may be fearful of something bigger. The widely followed 2y10y Treasury yield curve has remained inverted since early July, while the benchmark S&P 500 continues to weave in and out of bear market territory.


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