US Probably in Recession

By Staff, Agencies

A former advisor to the Federal Reserve Bank of Dallas, Danielle DiMartino Booth, told CNBC that the United States may already be in a “plain vanilla recession”.

The statement comes as world stock markets nosedive over fears the US economy is weakening.

A cyclical or plain vanilla recession is one of the two types of demand-driven recession. These typically follow periods of policy tightening that are aimed at staunching excess demand or inflation problems.

According to DiMartino Booth, CEO and chief strategist for Quill Intelligence, the recession started sometime around last October. She pointed to a weakening job market and increasing Chapter 11 bankruptcy filings. Additionally, she said declining housing prices and increasing apartment supply suggest this trend may continue.

The US economy suffered an unexpected setback in July as hiring fell sharply and the unemployment rate rose for the fourth straight month, with raised interest rates taking a toll on businesses and households.

The jobless rate jumped to 4.3%, up from 4.1% the previous month, the Bureau of Labor Statistics reported on Friday. The figure is the highest since the onset of the Covid pandemic in 2020.

The number of unemployed people across the US rose by 352,000 to 7.2 million, a notable increase from the 5.9 million registered a year earlier, when the jobless rate was 3.5%.

Friday’s report added further fuel to mounting concerns that the Federal Reserve has waited too long to cut rates. US recession worries roiled global markets on Monday.

The Fed last Wednesday opted to keep its benchmark interest rate in the 5.25%-5.50% range, where it has been for more than a year. Fed Chair Jay Powell indicated that the first rate cut of the post-pandemic era could come in September.