Most likely, you have already heard about the recent commotions in the stock market and the increasing fear of banks collapsing and another major recession. It’s understandable that you are concerned about making ends meet. You may be thinking, “are you going to be able to afford to put food on the table for your family? Inflation has been sticky and prices of food have significantly increased the past couple of years. Companies laying off left and right. Is your job secure or are you also at risk of being laid off? We can’t deny that the past 4 years since the pandemic hit the global economy, it has felt like a whirlwind of financial storms and you’re riding it through a rollercoaster. So let’s take a step back and understand what’s actually may be happening so we can better prepare and weather these financial storms, together.
So, what is a rolling recession?
Before we dive into that. Let’s first understand what does a recession mean and are we in one. According to the National Bureau of Economic Research (NBER), traditionally a recession in the US is generally defined as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months”. Some economists define it as “two consecutive quarters of falling real GDP (gross domestic product)” or in simple terms 6 months worth of data showing businesses have decreased their production and consumers have decreased their spending. Other economists have used the “Sahm rule” which is named after economist Claudia Sahm and has been known as the “widely cited indicator of recessions”. The Sahm rule basically uses the unemployment data to determine if a recession is approaching. It states that, “when the three-month moving average of the unemployment rate rises by at least half a percentage point (50 basis points) relative to its lowest point in the previous 12 months.”
So back in September 2022, the US economy had its two consecutive quarters of negative growth or falling GDP. But the government dismissed that we are in a recession as the labor market was still strong. With inflation still way above their target rate of 2% the Federal reserve still needed to reign the inflation back down by continuing to increase interest rates. In July 2024 the unemployment rate significantly increased to 4.30% from a year ago at 3.5%. The labor market is officially contracting.
In retrospect, I believe we are in a rolling recession and hopefully we are nearing its end as the labor market has softened. Back in March 2023, the World Economic Forum reported that many global economists believed that the US was in a rolling recession.
Based on the growing data, it appears that we have been in a recession since 2022 but not a traditional recession where it hits all sectors of the economy at approximately the same time but a rolling recession in which different sectors of the economy are contracting at different times while other sectors are expanding and growing. For example, at the beginning of 2022 the housing market had a steep decline as some overvalued real estate markets experienced a correction. Then, in 2023 the commercial markets contracted and affected many banks. Layoffs have been staggered as it hits one sector after another starting in 2023 with the tech sector and then moving to financials.
This rolling recession is the result of the world’s unified effort to save the global economy in response to the pandemic. The Federal reserve system, governments and central banks around the world provided stimulus checks to aid the people in order to uphold the global economy from collapsing. Because of the excess money circulating in the global economy and the limited amount of goods, inflation quickly developed. Interest rates was rapidly increased to prevent inflation from destroying the post-pandemic economic recovery. That is why recessions happen because there are inefficiencies in the global economy that needs corrections for the new global economy to emerge and stabilize.
Should you be concerned about this rolling recession? How is this going to affect you?
It’s important that you focus on your individual situation and financials in order to have a better understanding and preparation. Just like with any storms, it is when you are caught unprepared that you suffer the most pain and loss. But with the proper tools and preparation, you are able to weather the storm. No one knows when this financial storm will end but being patient, brave and alert will definitely help. If you’d like to know how to prepare for the worst and take advantage of the opportunities, check out my instagram reel post on here.
I hope this blog have helped you in some small way or form. Please feel free to reach out and subscribe. I appreciate you and grateful that you are here.
Praying that you’ll find the solutions to your problems and the opportunities that you are looking for; stay strong, prayerful and faithful!
