Who can say 'recession?'

Were it not so serious to many people it could be very amusing. Especially to those of us who enjoy finding humor in so many things. I’m still reflecting on all this Recession talk. Are we or aren’t we? It’s really sort of hard to tell. Technically in the United States there is only one department within our system that can answer the question. That is the National Bureau of Economic Research (NBER). Not the Chairman of the Federal Reserve, the President of the United States, your Senator or Congressman, any news anchor on cable television, or anyone else is authorized to formally make this declaration. By definition, the NBER simply states that that a recession is a period “between a peak of economic activity and its subsequent trough”. The most recent such trough occurred in April 2020.* Those guys are the only ones who can officially make that statement.

That is all well, good, and useful. However, many others state that we are in a recession when we experience two consecutive quarters in which total economic activity (as measured by GDP-Gross Domestic Product) declines. That just happened, but it has not been declared by those in charge of these matters. As for me, I always heard a Recession occurs when a neighbor down the street loses his job. Conversely, a Depression occurs when you lose your job. That actually happened to me in 1986 when the oil industry all but shut down. Therefore, I tend to have a special feeling about that “definition”. That was a period of great introspection, inspiration, and professional character building for a lot of us. Right now, I mostly know that everything seems be getting more expensive and I’m watching dividends and any source of income very closely. So far, so good.

As if the “recession definition debate” were not intriguing enough, a dear friend recently told me that employment in Louisiana had reached an all-time high. Also that in June of 2022 Louisiana had more workers and the lowest unemployment rate in state history!** You may have read that yourself. Now I do find that to be very interesting. Though I have not conducted a scientific survey, everywhere I go seems the following is seen and heard: “I need help but can’t find anyone, service levels are terrible, employee turnover is frustrating, I’ve been waiting months for……(you name it!). Now, as you’ve heard me state before I’m a Rolling Stones, Pink Floyd, Led Zeppelin, Elton John sort of guy-however once again this week I found myself reflecting on the wisdom of Merle Haggard. His 1981 rendition of Are The Good Times Really Over For Good may emerge as my theme song for the summer. Buried within that anthem of hope he states “Before the Beatles and Yesterday, when a man could still work and still would”*** What would he think today if he needed some product or service in a reasonable time frame? Thankfully, he ended that message on a positive note as we Americans are free to engage in solution providing efforts. At least historically that has been the case as we have always tended to “right the ship” after we muddle along for a while.

So which is it? This week I turned to Brian Nick, Chief Investment Strategist at Nuveen in his weekly commentary. He notes that, though last week the Federal Reserve did raise interest rates-and suggested more increases were likely to occur in the future, a hopeful tone has set in. The Standard and Poor index is more than 8% above its mid-June lows. Spreads on corporate bonds have narrowed. The selloff in the municipal (tax free) bond market has finally ceased. The best explanation for this synchronous rally is that markets, like the guys at Nuveen, do not believe that a severe recession is likely. That is even if the Federal Reserve does raise rates a bit more from here. A slowdown in economic growth is inevitable at this point, but strong private sector balance sheets and surprisingly persistent hiring growth should prevent a steep rise in unemployment.**** That sounds favorable, but I still wish any employer out there well in their effort to find and retain stable, competent, hard working employees!

The opinions, forecasts, and views expressed here are those of Tommy Williams and do not necessarily represent those of Williams Financial Advisors, Private Client Services, RFG Advisory, their employees, or their clients.

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* https://www.nber.org/research/business-cycle-dating

** https://news.yahoo.com/louisiana-more-employed-workers-ever-010033579.html?fr=sycsrp_catchall

***azlyrics.com/lyrics/merlehaggard/arethegoodtimesreallyover.html

****Brian Nick, Chief Investment Strategist-Nuveen Investments, Weekly Commentary dated 7/27/2022 and entitled “The Fed’s ‘summer of 75’ continues, despite growth risks”… https://www.nuveen.com/en-us/insights/investment-outlook/fed-update

This article originally appeared on Shreveport Times: Who can say 'recession?'