Are We in a Recession?

According to a traditional definition, the U.S. is not currently in a recession.

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Updated · 1 min read
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Written by Lauren Schwahn
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Edited by Sheri Gordon
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Fact Checked
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Though the economy occasionally sputtered in 2022, it has certainly been resilient — and now, near the end of the third 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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What has the Fed done?

After issuing seven interest rate increases in 2022 and four in 2023, the Federal Reserve 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.

The Fed left rates unchanged in September, November and December of 2023 and again in January, March, May and June of this year. Most recently, in September, the Fed cut rates by half a point in response to cooling market conditions.

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.

Frequently asked questions

The Federal Reserve’s rate actions are intended to tame whatever factors are influencing economic conditions. When inflation rises, the Fed raises the federal funds rate in order to slow consumer spending. When there is a recession, or even a threat of a recession, the Fed may lower interest rates in order to stimulate the economy. That’s because the federal funds rate impacts interest rates for things like mortgages, auto loans and credit cards. The lower the interest rate, the more appealing the product is for consumers.

But interest rate cuts are not intended to bring about a recession. The Fed raised rates from March 2022 to July 2023. The current federal funds rate has been in place since then. The Fed is poised to cut rates in response to an economy that has leveled out — not because a recession is nigh.

A number of factors go into the price of homes, but during a recession they generally go down. That’s largely because home prices are impacted by supply and demand — when demand is weaker, sellers often lower prices to entice home buyers. Demand is weaker for homes during a recession because people are less likely to want to make large purchases.

However, home price slashing doesn’t always happen during a recession. During the 1990 recession home prices were stagnant and then declined slightly. In the 2001 recession, home prices increased. During the Great Recession, home prices dropped significantly. Finally, during the brief coronavirus recession in 2020 housing prices began to rise then skyrocketed in the aftermath.

Like home prices, mortgage rates tend to drop during a recession largely due to a decrease in demand among buyers. The rates also tend to decline in reaction to federal funds rate cuts by the Federal Reserve, which often happen during a recession in order to stimulate the economy.

Food prices are, inherently, volatile. They’re subject to consumer demand, supply-chain disruptions, geopolitical strife, tariffs on foreign imports, weather and disease. During a recession food prices tend to drop to entice consumers to make purchases.

During the Great Recession, for example, the purchase of sale items rose dramatically, according to a 2015 analysis by the National Bureau of Economic Research.

Food prices are currently higher than they were before the coronavirus pandemic. Inflation has slowed since 2022 highs, but prices remain elevated for food overall. However, food prices for individual items tend to move differently depending on outside factors. Egg prices, for example, have risen primarily due to the avian flu. Meanwhile beef prices have been impacted by drought, high grain prices and rising operating costs due to high interest rates.

Treasury bonds fluctuate in response to the federal funds rate and short term interest rates. During a recession, interest rates typically drop. In response, bond prices increase while bond yields decrease. In other words, when the price of bonds increases, bonds will earn less. As you might expect, investors are typically less inclined to purchase bonds when they’re more expensive and yield less.

Inversely, during periods of economic growth bond prices will decrease — making them more affordable — and the yields will increase, which means the bonds will earn more.

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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.