Are We in a Recession?

According to a traditional definition, the U.S. is not currently in a recession.
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Written by Lauren Schwahn
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Though the economy occasionally sputtered in 2022, it has certainly been resilient — and now, near the end of the second quarter of 2024, the U.S. is still not currently in a recession, according to a traditional definition.

Even with tumultuous events last year, such as the failure of three U.S. banks, the nation has not tipped into recession — and certainly not a depression, either. A depression is an extended economic breakdown, and we have not seen signs of that kind of pain. (See recession vs. depression.)

The definition of a recession

The conventional benchmark has been that two consecutive quarters of a generally slowing economy defines a recession.

That definition was achieved in the first six months of 2022 as part of a shallow economic decline. In the first quarter, the economy shrank 1.6%, then improved, though still fell 0.6% in the second quarter due to lower inventory spending, housing investments and federal and state government spending.

However, the Bureau of Economic Analysis, an agency embedded in the U.S. Department of Commerce, estimates that in the first quarter of 2024, the economy grew at an annual rate of 1.3%.

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The Fed is pushing to slow the economy

The Federal Reserve, after issuing seven interest rate increases in 2022 and four in 2023, is not trying to trigger a recession but does want to slow the economy. The Fed had paused interest rate hikes in June 2023, noting inflation was showing some signs of easing, but warned that further rate increases were likely. On July 26, 2023, it fulfilled that warning by raising rates a quarter-point.

More recently, the Fed left rates unchanged in September, November and December of 2023 and again in January, March, May and June of this year.

Lowering consumer demand is the tricky elixir intended to reverse the higher prices we face with inflation. The risk of a recession is always a possible side effect.

How long do recessions last?

Historically, recessions have lasted anywhere from two months to several years, according to the National Bureau of Economic Research. But our current economic climate presents unique circumstances that make it difficult to draw a direct comparison with past events.

Unemployment is still low, but we hear more talk of layoffs and business expense cutting each week. The wars in the Middle East and Ukraine are another concern.

Economic cycles are impossible to predict, so it's best to be financially prepared.

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Getting ready for a recession

There are a few ways to deal with current economic challenges and prepare for future ones. Starting or beefing up an emergency fund can help you face financial setbacks without going into debt.

Now may also be the appropriate time to look closely at your expenses, adjust your spending and explore resources to get help paying bills.

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