The American Recession: It Will Get Worse Before It Gets Better

Are We Really In A Recession?

As fuel prices increase seemingly exponentially, and the United States’ economy weakens, economists are beginning to throw around a daunting term: recession. While some may have seen this coming as early as September 11, 2001, when the national stress level reached an all-time high, most of us can truly say that we noticed a difference following the devastation of New Orleans by Hurricane Katrina. As gas prices skyrocketed in response to the damage to the oil pipelines and refineries, consumer confidence started to crumble; little did we know how serious the situation would later become.

The Katrina Effect

Nearly three years after Hurricane Katrina wreaked havoc on the Gulf Coast, becoming one of the costliest and deadliest hurricanes in United States history, we are far from recovering. Many of us cringed when gasoline flirted with the $2 mark in the weeks after the storm; now most of the nation is paying in excess of $4 per gallon.

While it is the international game of supply and demand, along with the predictions of speculators, that drive the price of crude oil, the effects are felt intensely here at home. The rising cost of fuel drives increases in the prices of recurring expenses such as food; without a corresponding increase in wages, most of us are seeing our budgets becoming skewed towards merely covering the basics, and sometimes not even that. Discretionary spending, which can be an indicator of economic health, is decreasing dramatically.

Keep An Eye On The Stock Market

Watching a larger portion of our paychecks go to cover food and fuel causes a general sense of financial malaise. We curb our unnecessary spending in response, and focus on merely making ends meet.

Since leisure spending drives economic growth, this cause-and-effect relationship between rising prices and slowed spending have pushed the economy from a period of economic expansion towards a recession. If the condition of the stock market is any indicator (as it typically is), our economic situation is on a perilous downslide.

This is not to say all is lost. While it may be difficult to imagine a recovery, the economy is cyclical; it may not be completely dependable with regards to timing, but it WILL recover. We must all focus on staying afloat financially, perhaps even investing in the depressed markets, until the economy improves. Then the memories of this recession will be distant memories.