Happy Thursday, Daily Money readers. It’s Jayme Deerwester back with you, hoping your morning is going smoothly.
Another day, another bit of grim economic news. A day after the Fed confirmed its raising interest rates by another 75 basis points, we learned that the U.S. economy has contracted for a second straight quarter, sounding the alarm over a possible recession.
The nation’s gross domestic product – the value of all goods and services produced in the U.S. – shrank at a seasonally adjusted annual rate of 0.9% in the April-June period, the Commerce Department said Thursday. That followed a 1.6% drop early this year. Economists surveyed by Bloomberg had forecast a 0.5% rise in GDP.
So are we in a recession or not?
Two consecutive quarters of contraction meet an informal threshold for recession, but not the criteria relied on by the National Bureau of Economic Research. To decide if a downturn fits that criteria, NBER looks at employment as well as indicators such as consumer income and spending, wholesale and retail sales, and industrial production. Employment, likely the most critical gauge, has been robust, with employers adding 372,000 positions in June and job openings at near record levels.
Household income and spending have weakened, especially after accounting for inflation. And industrial production has been losing steam, with factory output falling in June, Wells Fargo wrote in a note to clients. But overall, those measures are still up on a quarterly basis, not down.
Even though some top economists are predicting a recession, most still forecast a slowdown rather than a downturn. That’s partly because household finances are healthy, says economist Paul Ashworth of Capital Economics. Household debt costs are about 9% of disposable income, he notes. That compares to 13.2% in 2007, before the Great Recession.
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🎧 Mood music 🎧
To quote The Killers: “And if the answer is no, can I change your mind?”
It seems JetBlue’s $3.8 billion offer was indeed enough to change Spirit’s mind. It’s terminated its plan to merge with fellow low-cost carrier Frontier. But it remains to be seen whether Securities and Exchange Commission will allow JetBlue and Spirit to form the nation’s fifth-largest airline.
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