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The word “recession” is revolving around the media and minds of the Americans this week.
The Dow Jones Industrial Avenge lost almost 900 points at the close of Monday, and the Secretary of Commerce Howard Lutnick said that Donald Trump's worldwide management rates “would be worth it” even if they caused a recession.
“These policies are the most important thing that the United States has had,” Lutnick told CBS News when asked if the tariffs were worth it if they lead to a recession. “It's worth it!”
This is what you need to know about a recession, and what experts say you can do to prepare:
What is a recession?
Economists use the term “recession” to describe a period of decrease in economic activity, explains the International Monetary Fund.
A popular definition of a recession is at least two quarters of the negative real gross domestic product, or GDP, which is the total value of goods and services in a country.
The National Office of Economic Research, a non -profit organization that tracks the commercial cycles of the United States, defines a recession as “a significant decrease in economic activity that extends throughout the economy and lasts more than a few months.” For the office to finally call a recession, the economic recession must be significant, distribute between sectors and not limit itself to a short period of time.
The office uses six key indicators to determine if there is a recession. These factors include personal consumption, personal income and manufacturing and trade sales, among others.
A recession in the Gross National Product (the total value of the goods and services produced in the USA for a year), an increase in unemployment and fall in shares prices may indicate that a recession is approaching, according to the Tax Foundation.
A recession generally lasts more than six months and can take a country to recover.
How to prepare for a recession
The United States is not in a recession at this time. But experts say it is better to prepare in advance in case the problems occur.
Kyle Newell, certified financial planner and owner of Newell Wealth Management, said Time That people should increase their savings to prepare for possible layoffs, which often go hand in hand with recessions.
“We want to make sure [people] Have enough cash reserves, hopeless without touching a 401 (k), or anything of that nature, to live, ”Newell told the magazine.
It suggests that a two -income home should have three months of saved expenses, while a single -income home should have six months of expenses saved.
Newell also warned that workers, especially the youngest, should continue to invest in their retirement account and should not panic if they see that their 401 (k) falls.
“The stock market will begin to decrease before a recession occurs,” he said Time. “And often people 401 (k) are linked to the stock market, so they can see that the value decreases. They should know not to panic, because they have time to invent it. ”
Is the United States in a recession?
No, the United States is not currently in a recession. Despite the dismissals throughout the federal government, the general labor market has remained resistant so far.
In addition, four of the six indicators measured by the National Office of Economic Research point to economic growth, he told CBS News, the main economist of Ziprecruiter, Julia Pollack.
But an increasing number of economists are likely to increase a future recession.
How could a recession affect me?
The impacts of a recession will vary from one person to another. However, millions will probably experience dismissals and face difficulties in finding employment during a recession.
Those who maintain their work can see their bosses freeze salary increases or reduce bonds as companies are forced to harden their belts.
Investment portfolios could also tanks, while lenders can doubt more in providing loans.
