Many economists say that two consecutive drops in gross domestic product (GDP) mean an economic recession. According to the latest report from the Bureau of Economic Analysis (BEA), US GDP fell -0.9% in the second quarter, which adds to the negative growth of -1.6% in the first quarter.
And while many economists identify a V-type recession, others like President Joe Biden and central banker Jerome Powell have dismissed the nation as being in a recession as labor market numbers are still strong.
Inflation, high interest rates, lack of consumer confidence, problems in the supply chain and the war between Russia and Ukraine are some of the factors that contribute to the idea that the US The US will fall into a recession, if not it already is.
Given this scenario, we must consider that there are different types of recessions, some deeper, others longer, and some less severe, which are quickly exited. Depending on the characteristics of how an economy recovers from recession, it is how they are recognized, and may be of type: U, V, W, L or K.
U
We speak of a U-shaped recovery when, unlike a V, the economic indicators take longer to reach the levels they were at before the recession, it is said that its duration can be one or two years.
V
This model is produced when there is a sharp drop in the economy, but the return to normality is also fast. It is the most dynamic economic recovery scenario and the one that for some economists the United States is facing. It would be something similar to when the economy fell sharply in the Covid pandemic, but immediately recovered. Its effect usually resolves in a matter of months.
L
This model implies a recession of the economy and its subsequent slow recovery. It is a recession that occurs sharply and whose recovery may take years.
W
There is talk of a recession in W when an economy falls and recovers quickly, then falls again. This model is especially painful for investors who jump back into what they believe is a recovering market before plummeting again.
K
Unlike V-shaped recovery, which is a drop and fast recovery; or a U, which indicates a slower recovery; K represents a rapid decline followed by an uneven recovery, with some sectors winning and others losing.
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