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Americans brace for economic reports, as concern of 'recession' grows

Posted at 5:40 PM, Jul 26, 2022
and last updated 2022-07-26 21:23:33-04

PHOENIX — Economists say this week's economic reports will be pivotal in predicting whether or not the U.S will slide into a recession or successfully reign in inflation.

On Wednesday, the Federal Reserve is expected to raise interest rates yet again. On Thursday, experts say the data will likely show another consecutive quarter of negative growth, which is a traditional indicator of a recession.

President Joe Biden has been trying to instill confidence saying Monday, "I don't think we're going to see a recession."

Economists though are all but certain that Thursday will reveal back-to-back quarters of negative GDP.

"Inevitable is a big word, [but] I think that the odds are increasingly pointing in that direction that we will be in at least some form of technical recession over the next 18 months at some point," said Dennis Hoffman, an economist and Director of the L. William Seidman Research Institute at the W. P. Carey School of Business at ASU.

Hoffman said if there is a recession "It will be one of the most unusual ones I've seen, because the job market is so strong [and] consumption is strong."

Hoffman told ABC15 it is complex but a lot of what we are seeing is a ripple effect of the pandemic, where the government printed trillions.

The stimulus money and savings by middle-class Americans have now led to increased demand, which has led to soaring inflation, and now rapid interest rate hikes.

"Inflation is a spiral up, recession will be a spiral down," said Hoffman.

Slowing demand is actually the antidote for inflation because it stops the upward spiral.

The Fed's tight rope walk, with rate hikes, will impact millions of Americans.

Hoffman says if the economy slows, the hardest hit will be the most vulnerable.

"It's going to be those people that were most hurt by inflation, those are the folks most at risk to losing their jobs," said Hoffman.

Nothing is guaranteed though, and experts say fear, and aggressive budget tightening by Americans, is likely to accelerate any potential recession.

Still, Americans should plan for every scenario.

"I think we need to take a deep breath and figure out a way to weather the storm and not look for some magic elixir from a politician to get us out of the woods," added Hoffman.