Are we in a Recession?

There has been so much chatter about America being in a Recession or for sure a Recession is coming.  This often times goes over a lot of heads.  Who even knows what a Recession is really?  Most of us are focused on keeping over inflated food on the table, making sure we have enough high-priced gas to get to the next paycheck, or preparing for kids to go into the next school year.  So, when we are hit with this conversation the chatter seems very distant.  Often times our willful ignorance can get the best of us.  Do we know if there is a way to prepare for a Recession?  These are the questions everyday citizens would like to know.  But if you are living from paycheck to paycheck is there a such thing as preparation for a Recession?  Do you remember the last time we were in a Recession?  It was not too long ago and that does not make us any more prepared for what is to come.   

 

What is a Recession?

As defined in Merriam-Webster a Recession is a period of reduced economic activity.  In plain English it is a period of time where the economy is declining in relation to trade, industrial and commerce for two consecutive quarters.  In the world it looks like higher products and services, job loss, business failures, and more expensive to borrow money etc.

 

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What happens during a Recession?

What usually happens during a Recession is the economy suffers.  How does the economy suffer during a Recession; can look different for every class.  In already low-income families, a Recession could cause a family to fall even lower into poverty.  With the value of money being lower the dollar does not stretch the same.  So even with government subsidies there is little to no relief to be had during these times for low-income families.  The middle class are probably hit the hardest.  This is because those in the middle class are more likely to lose their job and find a hard time replacing the job with a comparable income right away.  Companies lean into not hiring as much and maybe even laying people off or using who they have until the circumstances change.  As a result, this may cause individuals or small business owners to have to rely more heavily on credit and other means to survive the Recession.  It is also to be noted that this population of people experience more long-term negative effects of the Recession, such as having to extend their time in the workforce to make up for the losses they experience in their retirement portfolio, loss of values in homes and the stock market decline. In the Recession the upper class usually gain more wealth and the income inequality grows tremendously.  At this time, they have the advantage over all other classes, mostly because they have access to more capital and resources that would allow for them to prosper in areas where others suffer.

 

When was the last Recession?

Our last Recession on record began in December 2007 and lasted for approximately 18 months.  In 2008 the financial crisis that was experienced was contributed to the amount debt in the housing market was extremely high.  Lenders were ultimately the source of these high-risk loans, in which people who had poor credit ratings and high risk of default were able to secure mortgages when in normal circumstances they would not have been able to get them.  Although, the lenders and mortgage originators, borrowers and also investors all played a part of the 2007 Recession ultimately it was greed that fueled the supply and demand. 

As of right now on paper it looks like we are in a recession.  However, economist and other officials are saying that we aren’t really. It is safe to say that there are several ways one could possibly prepare.  Small to large business owners usually should rely on tax professionals or financial advisors of how to navigate.  It could look different for everybody so it is vital to do a financial assessment and come up with a reasonable actionable plan to get through this financial turbulence.

Watkins and Company CPAs will be glad to assist those who feel like they need guidance through this financial uncertainty.

Two locations servicing: Flowood, Pearl, Brandon, Jackson Metro Area, Madison

436 Katherine Dr #100

Flowood, MS 39232

919 Hwy 51

Madison, MS 39110        

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