Low-key Recession

Masking Factor

Government Spending

Core Definition

A downturn in the private sector that is being masked by high levels of government spending.

Primary Proponent

Chamath Palihapitiya

Indicative Economic Signals

Weak Non-farm Payrolls, warnings from consumer-facing companies like Airbnb

A recession is a significant, widespread, and prolonged downturn in economic activity. Recessions are commonly characterized by two consecutive quarters of negative gross domestic product (GDP) growth, though there are more complex ways to assess and classify downturns. [...] ## What Is a Recession? A recession is a significant and widespread downturn in economic activity that typically lasts for longer than a few months. A common rule of thumb is that two consecutive quarters of shrinkage in gross domestic product (GDP) indicate a recession. However, it's much more complex than that. ### Key Takeaways Recession Recession:max_bytes(150000):strip_icc()/recession-0153c288ec634820a0f1d7e917ffda80-489b5e0fee1e4be3849c1371552f0c05.png) Investopedia / Laura Porter [...] The unemployment rate is a key recession indicator. As demand for goods and services falls, companies need fewer workers and may lay off staff to cut costs. Laid-off staff then have to cut their own spending, which in turn hurts demand, which can lead to more layoffs. Since the Great Depression, governments around the world have adopted fiscal and monetary policies to prevent recessions from deepening into depressions, such as unemployment insurance and cutting interest rates.

for current spending. At the moment, the debt service ratio remains low and has been rising only gradually, suggesting low odds of a recession.4 [...] More generally, we believe U.S. corporation and household balance sheet fundamentals point to low odds of a recession. Further, if a cyclical downturn were to occur unexpectedly, these positive balance sheet fundamentals would likely reduce its severity. (A digression: The flipside of improving household and corporate balance sheets has been a deteriorating government balance sheet, but in a recent article, we explained in depth why we are not losing very much sleep over it.8) [...] drops sharply to below 1% by 2024. The December 2024 projection, in brown, starts at around 3% in 2024 and gradually declines through 2025.

A recession is a prolonged period of negative economic growth in a country. It's 1 of 4 phases in the endless economic circle of life, spanning from growth to peak to recession to trough (aka the bottom of the recession)—and back again. While it's frustrating that economic progress doesn't travel in a straight upward line, it's helpful to keep in mind that historically, periods of recession have occurred much less than periods of expansion and growth. And the US has recovered from every

Recessions generally stem from waning confidence and a sense among businesses and consumers that the economic tide is shifting. But from a broader perspective, recessions are often the result of structural changes in one or more key industries, economic shocks, or even psychological forces such as extreme optimism (which can lead to speculative behavior). Financial bubbles bursting (such as the stock market crash of 1929 or the real estate crash of 2007) can also be the cause of recessions. [...] Prices can fall—Severe recessions can involve deflation and a reduction in prices, especially of discretionary items and real estate. Spending focuses on relatively low-priced necessities. But recessions can also be responses to efforts to fight inflation, as with the recessions between 1980 and 1982, when the U.S. Federal Reserve (Fed) kept short-term interest rates well into double digits. [...] From a technical standpoint, a recession is often defined as two consecutive quarters of shrinking gross domestic product (GDP). But more simply, it’s a sustained contraction in economic activity. Dwindling production and consumption as well as higher unemployment or lower prices are telltale signs the economy has made its way into recession territory.