A Nation in Denial? Is the US Economy in Recession?

The media and the government continue to deny that the US economy is in recession. The Jobless rate is increasing and their is a crisis in housing, financial and Credit markets. With Fuel and food costs rising on top of all the other problems in the economy can the economy stabilize? Is there enough cash injection left to grow the economy or are the majority of people tapped out?

From the Associated Press:

And, there’s been a lot of talk about whether the economy is on the brink of, or fallen into, its first recession since 2001. That determination, made by a panel of academics, is usually made well after the fact

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Airlines Cut Jobs

The squeeze, a byproduct of record oil prices that are pushing airlines toward financial disaster, accelerated Wednesday when United Airlines announced plans to take 70 more jets out of service and cut domestic capacity by 17 to 18 percent in 2008-09. Its discount unit Ted will be shut down and 1,100 additional jobs eliminated, with more to follow.

That came two weeks after a similar move by AMR Corp.'s American Airlines, the only U.S. carrier larger than United, which said it would slash domestic capacity 11 to 12 percent after the peak summer travel season. American already has begun eliminating flights, as have No. 3 Delta Air Lines Inc. and others.

What determines a recession?

A period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters.

From an article on About.com:

They [BCDC] define a recession as the time when business activity has reached its peak and starts to fall until the time when business activity bottoms out. When the business activity starts to rise again it is called an expansionary period. By this definition, the average recession lasts about a year.

An economy cannot continue to go up and up forever it is a cycle of expansion peaks contraction and vallys. A smart business owner will plan for all the stages of the economic cycle and understand economic indicators to help develop their plan of action.

Will things get better? From the same Associated Press article:

Fed officials and the Bush administration are hoping that the Fed’s powerful doses of rate reductions and the government’s $168 billion stimulus package, including tax rebates for people and tax breaks for businesses, will pull the economy out of its deep funk in the second half of this year.

Even if that happens, the unemployment rate is expected to climb to 6 percent or higher early next year. Employers won’t want to ramp up hiring until they feel more sure that an economic recovery has strong legs.

I think the US is on the road to a recession for how long or how deep I do not know. Right now many sectors are in recession and if your business is in this sector you need to take action and create a plan to survive it.

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