No simple solution to this problem.

Playgrounds are where children spend their time playing with see-saws, swings, or monkey bars. But those born in the last 15 years are growing up in a different world. They are more inclined to stay home watching a cartoon or playing games with friends on an iPad. Times are changing and it would benefit the country if economic studies will, too.

What is a recession? The textbook meaning of a recession is a period of temporary negative economic growth during which GDP declines for two successive quarters. The National Bureau of Economic Research, or NBER, is the entity that determines whether the United States is or isn't in a recession based on multiple economic data. When the country goes into a recession, it is the duty of the Federal Reserve Bank to adjust interest rates to achieve full employment and their inflation target, a mandate given to them by the United States Congress. As the data released this week showed, the US suffered its second quarter of negative growth. Many are calling on the Federal Reserve to acknowledge that the country is in recession. There are even talks of rate cuts in 2023. However, having low unemployment with high inflation does not fit the criteria of a recession. This is why FED Chairman Jay Powell stops short of describing this economic softness as such. He has said that economic stimulus checks given to Americans are enough cushion for people to forgo full-time employment. So although there are 2 job openings for every 1 American inflation is elevated. There is simply too much money chasing too little goods. Bill Ackman of Pershing Square mentioned that inflation, not Fed hikes, is the biggest threat to the US economy.

So why is the economy experiencing negative growth if consumer demand is strong?

First, the decrease in the number of people looking for jobs has understated real unemployment rate. This is due to demographic changes, fewer job seekers, and increased retirees. Second, the pandemic stimulus totaling $803 billion was doled out to 158 million qualified Americans. This is in addition to state unemployment benefits. But roughly a quarter of that money was saved. However, with persistently high gas and food prices, people are spending more on services while trading down for cheaper goods instead. Pent-up demand for air travel has airlines bullish about the second half of this year. So although consumer goods companies like Walmart have experienced a deceleration in earnings and revenue, inflation persists.

Third, the almost two-year global lockdown hurt global trade. The invasion of Ukraine further derailed recovery. Every company from autos, consumer goods, retail and electronics fell victim to supply shortages creating supply and demand imbalance.

Lastly, the crypto bull market has created many millionaires in the past two years, many of whom have aided a faster-than-expected real estate recovery. As the price of bitcoin slowed some are now contemplating returning to full-time employment.

Ironically, opposing opinions about the academic definition of recession neglect one important metric - consumer sentiment. Easily defined, consumer sentiment is how one feels about their current financial situation. When the biggest contributor to GDP slows down spending, growth will slow as it has. Businesses have been laying off employees or rescinding job offers. This will aid in bringing down wage inflation. But because this metric is not considered, discourse about what a recession will continue.

All account for a discussion on whether we are in an economic slowdown or a recession. Admittedly, simultaneous pandemic and war are rare occurrences. Economics is a study of backward-looking data attempting to give an explanation of the current state. The actions of the FED can influence demand but not supply. This is probably why they are reluctant to use the "R" word. There is no simple solution to this problem.