It’s just around the corner, says every economist (and central bank). Warnings of a recession make weekly headlines, but economies are stubbornly defying orders – for now.
Simply put, the economy is the relationship between the supply of goods and services, and demand to buy them. When demand outstrips supply, businesses ramp up, and economies tend to grow. When the reverse is true, businesses tend to hunker down and economies shrink. Over the last 100 years, the average length of a growing economy is around 3 years. A shrinking economy, or recession, lasts about 1.5 years. Recessions have been a regular feature in our economic history, and there have been a couple of memory-making ones in our ✨very young✨ lifetimes (hello 2008, 2020 and… when will this one kick in?!?).
The R word
When we experience two consecutive quarters of negative economic growth (AKA shrinking), we collectively adopt the R label. We tighten our belts, but we do not panic! The economy is like any other long term relationship; there are good and bad seasons. What we do during the bad ones sets us up for the good years just beyond the horizon.
Worldwide, most economies are slowing down right now. Housing prices have fallen, and we feel the pinch every time we shop or fill the tank. Some of us are starting to cut non-necessities (*cough* Netflix). Our dollars are stretching less than they did this time last year (the very definition of inflation), and interest payments are getting more expensive.
No two recessions are the same and this one is being triggered by central banks trying to cool everything down. As we face into the inevitable, unemployment is still low, but companies are tightening their belts and layoffs started late last year in the tech sector.
It’s the economy, stupid
As scary as the headlines can be, there’s one thing to (frugally) celebrate; we’re experiencing precedented times for the first time in years. So we take our medicine, but let’s do it together. Join us for this week’s podcast on the economy. We’ll have a bit of an Economics 101 refresher, chat about past and present drama (yes, a bit of Silicon Valley Bank) and offer up some hacks to prepare.
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