The U.S. economy is in a wierd place at once. Job growth is slowing, but demand for staff is robust. Inflation is high (but not as high as last spring). Consumers are spending more in some areas, but cutting back in others. Job openings are high but falling, while layoffs are low and … well, it depends what indicator you watch.
That is one snapshot of where the economy stands, based on an evaluation of how various indicators compare with their historical levels and whether or not they’ve been recovering or worse in recent months.
How conditions are faring for jobs, income, consumers and production:
Manufacturing
and trade sales
Manufacturing
and trade sales
Manufacturing
and trade sales
The horizontal axis reflects indicators’ deviation from their 2010-2019 averages or, within the case of measures that typically rise over time, from their trend lines for the three years just before the pandemic. The vertical axis shows the change in each indicator over the past three months. All indicators are converted to a consistent scale to permit for comparisons. (See a fuller explanation of methodology below.) Some labels have been moved barely for legibility.
There isn’t any universally accepted definition of a “good” variety of jobs or rate of wage growth, which suggests the precise placement of the assorted measures is somewhat subjective. Still, the patterns are revealing: The indications are concentrated within the lower right-hand quadrant, meaning a lot of the economy is doing well, but slowing down.
Even in one of the best of times, it may well be hard to get a handle on what’s happening in an economy with 150 million staff and $20 trillion value of annual output. And these are removed from one of the best of times. The pandemic and its ripple effects are continuing to disrupt global supply chains and keeping tens of millions of Americans out of labor. The war in Ukraine has pushed up gas and food prices, and added a recent source of uncertainty. The Federal Reserve is attempting to beat back the fastest inflation in many years — and threatening to cause a recession in the method.
By one common definition, the US is already in a recession, because gross domestic product has declined for 2 consecutive quarters. Most economists consider that definition too simplistic, and like to have a look at a broader array of indicators across quite a lot of categories. Additionally they say that to grasp how the economy is doing, it’s important to think about each levels and rates of change. It matters, for instance, not only whether unemployment is low or high, but additionally whether it’s rising or falling.
It also helps to think about the newest data in historical context. The graphics below show how this economic moment compares with recessions of the past 40 years, using the top of the second quarter as a benchmark. Most often, the newest numbers don’t look very similar to the recessions of the past, although many show signs of a slowdown.
Job Market
How current conditions compare with recessions over the past 40 years
Jobs
–10%
+10%
1981
1990
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Unemployment rate
–80%
+80%
1981
1990
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Unemployment claims
–200%
+200%
1981
1990
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Job openings rate
–80%
+80%
2008
2020
2022
2001
12 months before recession
12 months after start
of recession
Recession begins
Graphic shows year-over-year percentage change. Data for 2022 is presented as if a recession began in June, which marks the top of a second consecutive quarter of declines in gross domestic product. (An official designation of whether the US is in a recession shall be made in the long run and can depend on several other indicators.)
If there may be one a part of the economy that’s clearly doing well at once, it’s the job market. Employers have added nearly six million jobs prior to now 12 months, and the unemployment rate recently matched a 50-year low. Employers would hire much more staff in the event that they could find them: There have been greater than 11 million job openings at the top of July.
Still, not every little thing is rosy. The share of adults who’re either working or actively on the lookout for work remains to be well below its prepandemic level, which helps explain the frequent complaints from businesses that they’ll’t find enough staff. After months of strong gains, hiring slowed in August, and the whole variety of jobs stays tens of millions below where it might be if the pandemic had never happened.
Layoffs, as measured through filings for unemployment claims, began rising earlier this 12 months but have since edged back down; nonetheless, one other measure, from a unique survey, didn’t show an analogous increase.
If layoffs pick up, be careful: Prior to now, when unemployment has increased even modestly, it has almost all the time meant the economy is in a recession.
Income and Prices
How current conditions compare with recessions over the past 40 years
Personal income
–10%
+10%
1981
1990
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Growth in hourly earnings
–10%
+10%
1981
1990
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Consumer Price Index
–15%
+15%
1981
1990
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Graphic shows year-over-year percentage change. Data for 2022 is presented as if a recession began in June, which marks the top of a second consecutive quarter of declines in gross domestic product. Personal income data excludes transfer payments and is adjusted for inflation. Growth in hourly wages shows earnings for production and nonsupervisory employees.
Employees have seen their pay rise significantly prior to now two years, as the recent labor market has given staff the leverage to demand raises. Other sorts of income, including from businesses and investments, have been rising too. The issue is, prices have been rising about as fast — or in some cases even faster.
The National Bureau of Economic Research, the semiofficial arbiter of recessions in the US, focuses on personal income that’s adjusted for inflation and excludes unemployment advantages and other government transfer payments. That indicator remains to be rising, partly since it measures income in the mixture — meaning not how much the typical person makes, but how much everyone, collectively, makes. When more individuals are working, overall incomes go up.
Many individuals, though, are falling behind. Inflation hit a four-decade high earlier this 12 months, and though it has ebbed a bit prior to now two months, nobody is certain how long that may last. Even with the recent cooldown, average hourly earnings have risen more slowly than prices this 12 months, although gains have been stronger amongst lower earners. Other measures of wages tell an analogous story. And even without adjustments for inflation, wage gains have been slowing in recent months — a possible sign that staff’ rare moment of leverage could also be nearing its end.
Consumers
How current conditions compare to recessions over the past 40 years
Consumer spending
–20%
+20%
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Consumer sentiment
–50%
+50%
1981
1990
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Retail sales
–30%
+30%
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Manufacturing and trade sales
–20%
+20%
1981
1990
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Graphic shows year-over-year percentage change. Data for 2022 is presented as if a recession began in June, which marks the top of a second consecutive quarter of declines in gross domestic product. Consumer spending data and manufacturing and trade sales data are adjusted for inflation.
Economic indicators is perhaps pointing in numerous directions, but this much is obvious: Americans feel terrible in regards to the economy at once. Consumer sentiment, as measured by a long-running survey from the University of Michigan, recently hit a record low — lower even than in the primary weeks of the pandemic, when tens of tens of millions of individuals lost their jobs overnight.
Prior to now, falling consumer sentiment has been a reasonably reliable recession indicator. Consumer spending accounts for about 70 percent of G.D.P., so when people stop spending, the economy is nearly guaranteed to run into hard times. To date, nonetheless, Americans haven’t acted on their dour mood by cutting back. Even within the face of high prices, people have continued to shell out for plane tickets, restaurant meals and other small luxuries. And now consumer sentiment is showing some signs of improvement as gas prices fall.
Interpreting the patron economy is hard at once, nonetheless, due to how the pandemic disrupted spending patterns. Many individuals are desperate to atone for deferred travel and experiences, even in the event that they need to pay more for them, which could cause spending on services like these to carry up even when the economy slows. Spending on goods, meanwhile, soared within the pandemic, as people traded gym memberships for home exercise equipment. Goods spending has now begun to slow. But supply-chain snarls have complicated the image — rising automobile sales, for instance, might mean that demand is robust, nevertheless it also might mean that production problems are easing and that there are finally more vehicles in the stores.
Production
How current conditions compare with recessions over the past 40 years
Industrial production
–20%
+20%
1981
1990
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Constructing permits
–60%
+60%
1981
1990
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Orders for capital goods
–30%
+30%
2001
2008
2020
2022
12 months before recession
12 months after start
of recession
Recession begins
Graphic shows year-over-year percentage change. Data for 2022 is presented as if a recession began in June, which marks the top of a second consecutive quarter of declines in gross domestic product. Capital goods data excludes aircraft and military equipment.
Historically, one in all the surest indicators of a coming recession has been a decline in orders for industrial equipment — firms don’t put money into so-called capital goods akin to recent machinery or delivery trucks after they’re fearful that demand is about to fall sharply. Straight away, though, those signals are being blurred by the identical issues that make it hard to interpret consumer spending data. If manufacturers pull back now, is it due to falling demand, or because they’ll’t get the parts they need?
There’s one sector that’s, unequivocally, behaving as if we’re headed for a recession: housing. Ever for the reason that Federal Reserve began raising rates of interest this 12 months, builders have been reducing construction, and would-be buyers have been pulling out of the market. To date, nonetheless, there may be little sign of a surge in foreclosures or of the financial stresses brought on by the last housing bust.
A slowdown that stays confined to at least one or two sectors doesn’t constitute a recession, which by definition involves a sustained decline in activity across a broad swath of the economy. It may not be obvious immediately, but when a recession does hit, it’ll show up in virtually every major indicator.
