Many individuals are concerned about a probable economic downturn, commonly referred to as a recession, when prices rise and the gross domestic product drops.


According to the consumer price index published by the Labor Department, consumer prices increased 8.2% from a year earlier in September while core prices, which don't include volatile food and energy prices, increased 6.6%.

According to the federal Bureau of Economic Analysis, GDP, or the total value of all goods and services produced in the United States, rose by 2.6% in the quarter that ended on September 30 after declining at an annual rate of 1.6% in the first three months of the year and 0.6% in the second three.

A "very, very serious" combination of issues is likely to send both the U.S. and the worldwide economies into recession by the middle of next year, Jamie Dimon, the chief executive of JPMorgan Chase, the largest bank in the U.S., warned in October at a conference in London, according to CNBC. For the time being, he pointed out, the American economy was "really still performing well," and consumers were probably in better shape than they had been before the global financial crisis of 2008.


How will a recession play out, and what will it imply for daily life if one does occur?


What is a recession? 

According to Sameer Samana, senior global market strategist for the Wells Fargo Investment Institute, a recession is simply "a contraction in economic activity" or "when the economy shrinks."

According to Wells Fargo economist Michael Pugliese, a recession is "a major fall in economic activity that spreads across the economy and lasts more than a few months."

The nonprofit National Bureau of Economic Research considers a number of indicators, including employment, consumer spending, retail sales, and industrial production, in addition to GDP when evaluating whether a recession has occurred.

According to Samana, there are two types of recessions: genuine recessions and technical recessions.

The harshness, he said, is what makes a difference. "A technical downturn is more of a shift in the mathematics. A more significant contraction across a wider range of categories characterises a true recession."

Is there a recession coming?

Although stocks have increased in November, this does not mean that the economy is in good shape.

Since the beginning of the month, the S&P 500 has increased amid indications that inflation is slowing. This development may indicate that the Federal Reserve will scale back its most aggressive programme of interest rate increases since the early 1980s.

However, economists warn it does not guarantee that the country would escape a recession in 2019.

According to a study of 50 economists conducted by Wolters Kluwer Blue Chip Economic Indicators on November 7 and 8, only 22% of analysts think the Fed will be able to reduce inflation without causing a recession. This is down from 24% in October and 38% in September who thought the central bank could pull off a "soft landing." The overwhelming majority of economists think the downturn will be brief. 

What is a mild recession?

If the country's gross domestic product, or economic activity, decreases by 1.2% and the unemployment rate increases from a 50-year low of 3.5% to 5.4%, a moderate recession may lose the economy 1.8 million jobs. Even while hiring remained high despite concerns about a recession in October, the national unemployment rate increased from 3.5% to 3.7%.

What is a severe recession?

A severe recession could result in the loss of 3 to 4 million jobs, a decline in GDP of 2.5% to 2.7%, and a 7% unemployment rate. According to the Federal Reserve, the "Great Recession" from December 2007 to June 2009 was the longest economic downturn since World War II.

What occur during recession? 


The economy contracts during a recession as a result of a drop in consumer expenditure, according to Samana.

About 70% of the U.S. economy is made up of consumer spending, he noted, adding that during a downturn, the reduction in spending "then feeds into overall demand for services."


As a result, businesses may decide to reduce the number of employees they have, further contributing to the slowdown in economic activity. According to Pugliese, unemployment frequently increases during recessions, and total employment levels may even decline.

Additionally, GDP growth typically slows down during recessions as a result of decreased employment and consumer demand, which results in lower production of goods and services.

In a downturn, "you might generate less if you have fewer staff, all else equal," Pugliese added. "These things are linked to one another. Many of those indicators are either decreasing or slowing in terms of growth."

Recessions have an impact on wages as well, Samana claimed.

He said, "It's difficult to fight for salary rises." Employers may refuse a salary request if unemployment is high and argue that a worker could be replaced for a lower wage rather than a higher one.

According to him, housing prices can drop during a recession just like the prices of other goods and services.

When do recessions end?

According to Samana, for an economy to be considered to be in a recession, there must be two consecutive quarters of declining output.

However, Pugliese noted that there is no set period of time within which a recession must persist and that a downturn's duration might differ.

Who is the hardest hit by a recession?

According to Samana, everyone can suffer during a recession, including those with lesser incomes or unskilled workers.

According to Pugliese, it is difficult to generalise that one group may be affected more than others. He said that while the leisure and hospitality sectors were particularly hard affected in the COVID-19-caused recession of 2020, the IT sector had a difficult time in the recession of 2001.

What occurs to inflation while a recession is in effect?

In the past, inflation has appeared to remain high throughout economic downturns.

However, when a recession takes hold, inflation will start to decline. According to Samana, this can happen after a quarter or two of economic downturn.

"How much does it come off this time is the tough part," he remarked. "The economy would need to turn around first, and then individuals would need to experience the effects of that turnaround. They'll probably start to cut back on their spending, and as a result, those costs will start to rise."

What ought to be purchased ahead of a recession?

If you're worried that you won't have a regular salary in a few months, it's not a bad idea to stock up on household supplies and shelf-stable meals now while you still have one.

But be careful not to overdo it.

Additionally, you might want to make an effort to pay off as much debt as you can, especially any high-interest debt.

What actions ought to be avoided during a recession?

Spending needs to be kept under control in a downturn. Aim to stay inside your budget and refrain from splurging.

Also, if at all feasible, try to refrain from taking on additional debt.

Should you buy a home during a recession?

According to a poll by warranty provider Cinch Home Services, Americans are divided on whether they would purchase a home during a recession.

A housing recession, according to the National Association of Realtors, occurs when house sales decline for six consecutive months. Sales of existing homes decreased in September for the eighth consecutive month, and they were down about 24% from the same month last year.

It was the third consecutive month that prices decreased after hitting a record high of $413,800 in June, while the median existing-home sales price increased by 8% year over year to $384,800 in September.

In the Cinch poll, nearly 50% of respondents who were citizens of the United States indicated that a recession would make home purchases "more likely."

However, according to a Cinch survey of American homeowners, 42% stated they would be less inclined to purchase a home during a recession, and 14% said it would not have an impact on their plans.

72% of poll respondents who were homeowners, 24% who were renters, and 4% who were living somewhere they weren't paying rent or any other bills.