The Atlanta Federal Reserve’s GDPNow tool indicates that the economy may be in the opening stage of a recession. The second quarter may post negative gross domestic product (GDP). A weakening again in the third quarter would make it official.
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The Atlanta data is not necessary to make the case the second quarter will post negative GDP and that the third quarter will be worse. Consumer confidence is already in the toilet. Inflation may continue above 8% year over year, measured both by the consumer and producer price indexes. Oil and gasoline prices alone will keep these numbers high. Food prices simply add to the difficulty. Wages, in most cases, are not keeping pace. While jobs continue to go unfilled, and the number of people available for work is high, it does not mean these jobs will pay well.

What are the things that make Americans feel rich and drive consumer spending? Their home prices, for one. Their access to free cash to spend is another. Home prices will be affected by high mortgage rates. Inflation has eaten into consumer cash reserves already. Consider that families may be paying hundreds of dollars more for gas than they did a year ago. People can never prepare for that kind of shock.

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Companies will not hire aggressively forever. They are constrained by the same problems consumers are. They have started to lose access to cheap cash. The costs of many goods and services they use have risen at a rate that is hard to imagine. Earnings already have dropped at many large companies. Multiply that by tens of thousands of small businesses.

The World Bank recently warned that economies around the world could buckle. In the United States, the process has begun.

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