AUSTIN (KXAN) — Whether the U.S. is in a recession is a hard question to answer, one Austin economics professor said.
Michael Brandl, an economics professor at the University of Texas at Austin, said there is not a complete definition in economics of a recession, which is the idea that economic activity has declined.
An informal recession definition is when the gross domestic product (GDP) declines for two consecutive quarters. This happened in the first two quarters of 2022 in the U.S., per Bureau of Economic Analysis data.
But the National Bureau of Economic Research’s Business Cycle Dating Committee has the official say on whether we’re in a recession. The committee looks at several factors beyond the GDP to make this decision.
Even if the committee met today, we wouldn’t know for likely two more months that we were in a recession today, Brandl said. This makes it difficult to say whether we’re in a recession today.
“They look at the depth of the drop in the level of output, how widespread it is through the entire economy, and how long it lasts,” Brandl said. “It really has to last more than just a few months for it to get labeled as a recession.”
The Great Recession between 2007 and 2009 happened quickly, he said. It was clear that we were in a recession after the financial markets collapsed, but the committee still waited to officially call it a recession. In 2020, the pandemic caused another recession where output dropped “dramatically and was widespread through the economy.” The committee, however, called this a recession quickly.
Another unknown is the effect that the Federal Reserve is having on the economy after it raised interest rates last week. Brandl said some people are concerned this was an overreaction and could push the economy into a recession unnecessarily.
Brandl said consumer confidence levels do not always correlate with how the economy is faring. The June 2022 consumer confidence index in the U.S. was 95.63—an all-time low. CCI levels over 100 signal a boost in the consumers’ confidence in the future economic situation, according to the Organisation for Economic Co-operation and Development.
Other low levels were in 1974, 1980, 2008, 2009 and 2011.
“But when you actually look at the data, that doesn’t really have that big of an influence on actually determining whether the economy’s in a recession or not, strange enough,” he said.
Who do recessions impact most?
“Usually what happens is the people at the lower end of the economic ladder suffer much, much worse. And also younger people,” Brandl said.
He said younger people are often the last hired and the first fired when a recession hits. Then, after the recession, job creation does not happen as the economic output increases.
Historically, people who had a college education were often insulated from unemployment, but that is no longer the case, Brandl said.
“If you happen to be leaving school when the economy’s not doing very well, it can make things so much more difficult,” Brandl said. “That’s why savings, regardless of your age, becomes very important to have.”
How would a recession impact Austin and Texas?
Due to a large influx of people coming to Austin, Brandl said Austin may not be as negatively impacted as other areas in the country—though outcomes are not certain.
This is because there is a continued influx of people coming to Austin, a growing tech sector, a robust real estate market and job creation due to more people relocating to the area.
“Those things will probably continue, even if the economy does fall into an official recession, because they haven’t significantly fallen in Austin,” he said.
However, tourism might be impacted greater than other Austin industries, Brandl said.
“If people don’t have a job, or they’re not working as many hours as they did previously, one of the first things they’re going to cut is taking a vacation and maybe going out to eat or traveling to Austin for a nice vacation,” he said.
In Texas’ large oil industry, a recession typically slows the business as firms produce less, require less energy and need less oil to transport goods. This hurts the oil industry as demand decreases, Brandl said, but in turn it usually results in lower oil prices.
When was the last recession—and when were they announced?
The United States has seen eight recessions since the late 1960s, according to data shared by the Federal Reserve Bank of St. Louis. The starts and ends of the recessions are often announced months after it begins.
- Q2 in 1969 to Q4 in 1970: announced start in May 1970; announced end in Aug. 1971
- Q4 in 1973 to Q1 in 1975: announced start in May 1974; announced end in Feb. 1976
- Q2 in 1979 to Q2 in 1980: announced start in Nov. 1979; announced end in May 1981
- Q2 in 1981 to Q4 in 1982: announced start in Feb. 1982; announced end in Aug. 1983
- Q4 in 1989 to Q4 in 1991: announced start in Feb. 1991; announced end in Feb. 1993
- Q1 in 2001 to Q3 in 2001: announced start in Feb. 2002; announced end in Aug. 2002
- Q4 in 2007 to Q2 in 2009: announced start in Jan. 2009; announced end in April 2010
- Q1 in 2020 to Q2 in 2020: announced start in July 2020; announced end in Jan. 2021