Rolling Recession: What Is It And Is The US In One?
In the United States, some industries are expanding, and others are contracting, these are indications that the country could be in a rolling recession.
Over the last 16 months, economic analysts have been flip-flopping on the issue of whether the United States will or won’t experience an economic recession in the near future. We haven’t seen this much back and forth since CBS aired the 2022 gold medal Olympic ping pong match last summer. The reason why it is difficult to predict one way or the other is that some US economic sectors are performing well while showing growth and there are other sectors of the economy that are hemorrhaging jobs and experiencing nightmare sales slumps this is referred to as a rolling recession.
The most common type of economic recession is when all a nation’s economic sectors contract simultaneously impacting every facet of a country’s financial well-being. Economic sectors divide a nation’s different industries into three main categories, and they are the primary, secondary, and tertiary sectors. The primary sector is involved in the extraction and production of raw materials, and some examples would be farming, fishing, logging, and mining industries.
The secondary sector is comprised of industries that take raw or intermediate materials and transform them into sellable goods. This sector would be where you have automobile manufacturers, building and home construction, textiles, and the clothing industry. This sector requires a lot of energy to use to power its factories and machinery to produce these products while producing a considerable amount of waste materials.
The tertiary sector is defined as a service industry where these companies provide customers service for a fee. Examples that fall into this category are banks, movie theaters, concert venues, sports stadiums, resorts, and restaurants. If all three of these sectors’ industries were to contract at the same time that would constitute an economic recession. However, what we are seeing in our current economic climate is that some sectors are expanding and performing well, and other sectors are contracting at a terrifying pace, in other words, we could be experiencing a rolling recession.
The common understanding of a recession is a nation’s economic industries all begin to contract as they earn less revenue which causes joblessness and a shrinking Gross Domestic Product total. So why are we seeing every company in our technology industry laying off tens of thousands of workers and missing their sales forecasts by a mile but we see entertainment facilities earning historical profits? According to CNN Business, “During Covid lockdowns, money was funneled into the goods sector because there was very little access to services as consumers quarantined in their homes. Then, as the economy reopened, pent-up demand caused a huge surge in services.”
This can explain why the housing market is seeing its worst sales slump since the housing collapse of 2008. Many of the companies that are categorized in the secondary sector are listed on the S&P 500. An astonishing 69% of these companies are reporting that they missed analysts’ revenue projections for the last quarter. Only eight of the S&P’s companies have issued positive guidance for this present quarter.
That has sent investors scrambling to move their money into sectors that are looking more positive like Uber. They announced yesterday that its 4th quarter revenue was $8.6 billion and that was a whopping 49% increase over last year’s 4th quarter earnings. That announcement drove up Uber’s stock valuation by 5.5% by the closing bell on Wall Street yesterday which is more proof that we are experiencing a rolling recession currently as we are seeing many service industry companies showing growth and expansion.
Google’s parent company took the preverbal stock bath yesterday plummeting 7.7% due to overall fears in our technology industry and massive job loss announcements coming from all the different companies on a daily basis for the last month. They also had a public demonstration go horribly wrong while showcasing their new AI Chatbot Bard who gave incorrect information to one of the test questions it was asked to answer during the exhibition. This has investors questioning whether Google’s stellar reputation for reliable information could be on the decline.
