Some believe we are already in one.
Disclaimer: This article is accurate and true to the best of my knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
A lot of us have been concerned about a recession and are wondering when one will occur: While we are not formally in a recession right now, many believe that we are actually experiencing one.
"Are we in a recession? Formally, no. A committee at the National Bureau of Economic Research (NBER) that focuses on business cycles makes the official determination about whether we’re in a recession or not. On its website, the NBER defines a recession as a 'significant decline in economic activity that is spread across the economy and lasts more than a few months.' The committee generally makes the official determination about a recession retroactively, so it’s possible that a 2022 recession has already started." —Sarah Hansen
Economic scholars believe we may be in for a recession within the next one to two years.
"Goldman’s analysts pegged the probability of a recession within the next year at 30%, up from their previous forecast of 15%. Over the next two years, the analysts say there’s a roughly 50% chance of recession....The Fed is watching how the economy is doing, too. A report released this week by economist Michael Kiley found that there's a greater than 50% chance of a recession between now and next March — and a 67% chance of a recession over the next two years. In testimony before Congress on Wednesday, Fed Chair Jerome Powell acknowledged while the central bank is trying to avoid an economic downturn, a recession is 'certainly a possibility.'" —Sarah Hansen
The White House has remained optimistic—President Biden said that a recession is not inevitable. While Treasury Secretery Janet Yellen reiterated Biden's message, she did acknowledge that "inflation is unacceptably high."
The length of recessions vary: They can last anywhere from a few months to three years.
"Recessions can last anywhere from a few months to a few years. The last recession, spurred by the pandemic, officially started in February 2020 and lasted just two months. The recession that began in December 2007 and ended in June 2009 was the longest since the Great Depression. (FYI: There's a difference between a recession and a depression. Depressions tend to be much more severe and much less frequent than recessions. They're generally characterized by prolonged periods of high unemployment and bigger slowdowns in economic activity.)" —Sarah Hansen
So what does this mean for you?
"While recessions are regular occurrences in the cycles of the economy, they may mean some changes in your daily life. When people start to worry about a slowdown, they spend less. High inflation compounds that problem, because everyday essentials like gas and groceries are eating up a larger portion of consumer budgets. Less consumer spending means that businesses might scale back to cut costs. Oftentimes, those cutbacks include eliminating jobs or restricting raises. You might notice prices in the supermarket start to fall. If you're looking to prepare for a recession, you may want to ready yourself to see your stock portfolio decline — but remember that making big changes to your investment plan during market downturns is never a good strategy. This is also a great time to check in on your emergency fund, which should be stored in cash and include three to six months of essential expenses." —Sarah Hansen
In other words, it's important to have a solid emergency fund at the ready, hold any investments you have made, if possible, and budget a bit more stringently than you normally would.
Additionally, it's important to keep in mind that companies will often fire people or lay more employees off during a recession, so it might not hurt to build at least one additional source of income right now. This could include dividends from stocks, freelance income, etcetera.