Just like with personal health, no matter how well you take care of yourself, you’ll still come down with a bug every now and again. The same can be said for economic conditions — think of a recession as a nasty bout of flu that will occasionally affect the economy — there’s just no avoiding it. No matter where you live in the world, you’re going to see a downturn or two in your lifetime. While the U.S. has come a long way from the 2009 recession, the consistent setbacks in the economy continue to keep confidence at bay — we’re not out of the woods yet.
A recession is generally defined as two consecutive quarters of poor economic performance so a weak quarter raises the alarms as a symptom of economic illness ahead. When was our last temperature spike? Unfortunately — the first quarter of 2016.
When low oil prices contributed to a poor annual growth rate of just 0.8 percent at the end of March, we put ourselves on notice for trouble ahead. Just think about that for a minute — our last red flag was this year. While the U.S. economy has grown for the last 84 months, the current recovery has been the slowest on record in comparison to past downturns. It’s been one nasty flu! In fact, the present recovery is the fourth-longest since the end of World War II with an average annual growth of about 2.1 percent in the past seven years.
Over the last seven years, 2016 is the fifth year the U.S. has had at least one quarter in which the economy grew at an annual rate of less than one percent, but as in the past, the economy quickly rebounded. In April, consumer spending jumped the most it has since the recovery began and the expected growth this quarter is estimated to be about 2.5 percent.
Inflation has remained tame, which has been great for consumers, but low inflation can also reflect weak wage growth. However, economists continue to blame low oil prices for our latest hiccup in health. Between the resulting job and capital losses, a dip in oil prices can significantly trim growth.
For now, the recession risk will remain low for the next couple of years as we continue to recover. As economic problems are cyclical in nature, what will keep the U.S. and global economies from reaching full potential will eventually stabilize for the upswing — so don’t panic. If we use our common sense and get plenty of rest, we’ll feel better in no time.
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