Is the United States in a Silent Recession?

In today’s post, I want to discuss why I believe we are in a silent recession in the United States.

What is a “silent” recession?

A silent recession is defined as an economy not meeting the traditional definition of a recession, yet people hurting financially.

How is A recession defined?

Traditionally, a recession is defined as two consecutive quarters of negative GDP (gross domestic product). More recently though we’ve seen the switch to the academic version. This is one is that the NBER (National Bureau of Economic Research) defines when a recession occurs. There’s a lot more that can be said about the NBER and their methodology (which lacks a quantitative measure), but what’s important is that there are several problems with both. 

Why doesn’t the definition of recession accurately portray the economy?

Both definitions don’t accurately reflect the state of the average American consumer. This is because the definitions are heavily reliant on consumer spending, but that doesn’t reflect the debt the consumers take on. Many Americans can’t afford things and have been forced to take on more credit card debt as well as “Buy Now, Pay Later” schemes. Also, there is a focus on stock market health. In 2023 the stock market outperformed what many believed would happen, do to such things as massive stock buybacks and many companies laying off staff and boosting their offshore presence in order to boost profits. While we can’t really blame the companies, we must point out a small percentage of companies comprise a large amount of the stock market index. Separately, the definition of recession doesn’t factor in inflation (Read why CPI statistic is flawed here). Employment numbers are also miscalculated (Flaws in the Unemployment Rate) and misleading with most of the job creation in the jobs market from government jobs. 

As we see, I’ve discussed before, government stats are old and antiquated and were meant for a different era. We definitely see this with the unemployment rate. It fails to capture things like underemployment and the gig economy accurately. Many people are working multiple jobs in order to pay bills. Much of the govt stats are based on surveying people and extrapolating the numbers out.

One big reason we are in a silent recession is that there is a big disconnect between how Wall Street is doing and main street. Hedge funds have been making record profits, but everyday people are struggling to pay bills and pay necessities. We see continue to see things like Shrinkflation taking on a new life of its own. Cereal boxes are now manufactured tall but much thinner. 

There are many other economic issues that are either being ignored or being swept under the rug as not a big deal. At some point though, this quiet recession I believe will turn into a full-blown crisis (prepping tips read here).