Commentary
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Our commentary partners will help you reach your own conclusions on complex topics.
Well, now everyone is talking about recession. We have, as you know, for several months at least, but it’s now the talk of the town. What is a recession after all? Well, it’s like the Supreme Court and pornography. You know it when you see it. And there’s a special board at the National Bureau of Economic Research that officially calls the business cycle. It’s a bunch of independent academics, not government employees. Now, traditionally, they have looked at four different indicators as the primary indicator. The first is employment. And so far, so good on that score. The second is industrial production, which the Federal Reserve measures. Now industrial production includes a whole host of things. What we already know is that manufacturing is in decline. But overall industrial production, which includes mining, think oil drilling, is still holding up as long with utilities. In addition, there’s a an organization that ask businesses how they’re doing called market. And they reported that, in fact, manufacturing is declining in their surveys as well. Then there’s real final sales, which is declining. And finally, something called real disposable, excuse me, real personal income, less transfers, sounds technical, but that’s what it is. It’s essentially unchanged. So I would say we got one up two down, and one tide, we’ll have to see. There are other signs as well. For example, the Federal Reserve surveys businesses in each of the 12 Federal Reserve districts, three of the biggest ones, New York, Philadelphia, and Dallas, are all in contraction mode. In addition, the Michigan consumer sentiment index dropped 14%. In between May and June. It is now at the lowest level since it began, which was actually right after World War Two, it’s down to a level of 50. In the last three fairly deep recessions, they tended to bottom out in the mid 60s, so this is quite low. In addition, 79% of the people in the survey, expected worsening business conditions in the six months ahead. So consumers have a bleak attitude as well, to sort of put the ribbon on the whole story, to have government leaders. One is Treasury Secretary Powell, and the other is Treasury Secretary Janet Yellen. So Chairman Powell said, well, a recession is possible. And Yellen said a recession is not inevitable. Given everything, I suppose they’re putting as good a spin on it as possible. But that is pretty thin rule when it comes to defending the state of the economy. So what should you do? Well, you know, recessions are not the end of the world, we tend to have the about every six or seven years. The first thing you should ask yourself, Is Is your job secure. If your job is secure, you’re probably going to do okay. Your income as now may not keep up with inflation, but at least you’ll have an income coming in. The second thing you should consider is do you have a heavy amount of credit card debt. And to the extent possible, you should pay off your credit card debt and not use your credit card for charging purposes. Unless you pay it off at the end of the month. During the recession, it can build up easily, and that can lead you into financial trouble. And finally, and this is true at everyone, watch you’re buying the recessions are times of uncertainty. And when you face uncertainty, the prudent thing to do is step back and take it easy.
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