Economic Recession | Weekly Excerpt

Economic Recession: a decline in productivity, generally when the rate of change of GDP is negative for two consecutive quarters.

That is just what has happened, according to the U.S. Bureau of Economic Analysis GDP report released Thursday, which indicates that for the second quarter of the year there has been a contraction in output by -0.9%, following a -1.6% decline in the first quarter.

According to the U.S. Bureau of Labor Statistics, the decline in GDP, (the reason behind this economic recession) is due to declines in private investment, residential investment, federal government spending, state and local government spending and nonresidential fixed investment that were partially offset by increases in exports and personal consumption expenditures (PCE). Imports, which are a subtraction in the calculation of GDP, increased.

Compensation costs for civilian workers increased by 5.1% and for private industry workers increased by 5.5% during the year. This is the other side of the coin that has made it possible to not only maintain, but expand personal consumption expenditures.

At its Wednesday meeting, the Fed announced a rate hike of 75 basis points, the fourth consecutive rate hike, bringing the effective total rate to 2.33%. Some analysts expect a continuation of the rate hike, and while a Volker-like Powell could pull hard on the reins of runaway inflation and bring it down.