\n<\/p>\n
Officially, the NBER defines a recession<\/a>\u00a0as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” In fact,\u00a0the latest quarterly gross domestic product report, which tracks the overall health of the economy, showed a second consecutive contraction<\/a> this year.<\/p>\n Still, if the NBER ultimately declares a recession, it could be months from now, and it will factor in other considerations, as well, such as employment and personal income.<\/p>\n<\/div>\n What really matters is their paychecks aren’t reaching as far.<\/p>\n Tomas Philipson<\/p>\n former acting chair of the White House Council of Economic Advisers<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/blockquote>\n That puts the country in a gray area, Philipson said.<\/p>\n “Why do we let an academic group decide?” he said. “We should have an objective definition, not the opinion of an academic committee.”<\/p>\n<\/div>\n For now, consumers should be focusing on energy price shocks<\/a> and overall inflation<\/a>, Philipson added. “That’s impacting everyday Americans.”<\/p>\n To that end, the Federal Reserve<\/a> is making aggressive moves to temper surging inflation, but “it will take a while for it to work its way through,” he said.<\/p>\n<\/div>\n “Powell is raising the federal funds rate, and he’s leaving himself open to raise it again in September,” said Diana Furchtgott-Roth, an economics professor at George Washington University and former chief economist at the Labor Department. “He’s saying all the right things.”<\/p>\n However, consumers “are paying more for gas and food so they have to cut back on other spending,” Furchtgott-Roth said.<\/p>\n “Negative news continues to mount up,” she added. “We are definitely in a recession.”<\/p>\n<\/div>\n The direction of the labor market will be key in determining the future state of the economy, both experts said.<\/p>\n Decreases in consumption come first, Philipson noted. “If businesses can’t sell as much as they used to because consumers aren’t buying as much, then they lay off workers.”<\/p>\n<\/div>\n On the upside, “we have twice the number of job openings as unemployed people so employers are not going to be so quick to lay people off,” according to Furchtgott-Roth.<\/p>\n “That’s the path to a soft landing,” she said.<\/p>\n<\/div>\n While the impact of record inflation is being felt across the board, every household will experience a pullback to a different degree, depending on their income, savings and job security. \u00a0<\/p>\n Still, there are a few ways to prepare<\/a> for a recession that are universal, according to Larry Harris, the Fred V. Keenan Chair in Finance at the University of Southern California Marshall School of Business and a former chief economist of the Securities and Exchange Commission.<\/p>\n Here’s his advice:<\/p>\n That makes this a particularly good time to identify the loans you have outstanding and see if\u00a0refinancing<\/a>\u00a0makes sense. “If there’s an opportunity to refinance into a fixed rate, do it now before rates rise further,” Harris said.<\/p>\n<\/li>\n Although there are purchase limits and you can’t tap the money for at least one year, you’ll score a much better return than a savings account or a one-year certificate of deposit, which pays less than 2%. (Rates on online savings accounts, money market accounts and certificates of deposit are all poised to go up but it will be a while before those returns compete with inflation<\/a>.)<\/p>\n<\/li>\n<\/ol>\n Subscribe to CNBC on YouTube.<\/strong><\/em><\/a><\/p>\n<\/div>\n<\/div>\n\n
Consumers are behaving like we’re in a recession<\/h2>\n
What comes next: ‘The path to a soft landing’<\/h2>\n
3 ways to prepare your finances for a recession<\/h2>\n
\n