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Concerned About Recession? Here’s What To Know

March 15, 2024 11-minute read

Author: Kevin Graham


If you read the headlines, prices are going up, the supply chain remains a concern and the housing market may be slowing. The economy has been running hot for a while now, but is it due for a correction? Everything goes in cycles, and there’s been more serious talk of a recession lately.

If you’re a mobility manager trying to figure out where your employees need to be and the right moves for your business, this is no doubt on your mind. However, we’ll go over why there’s no reason to panic.

What Is A Recession?

Before we start talking about whether we’re in or headed for a recession, it helps if we can all agree on the definition. However, this is actually harder than you might think.

You may actually hear two different definitions. The one that’s easiest to understand is the one that’s built around gross domestic product (GDP), but it may not be the most accurate. This says that if GDP is negative – meaning the economy is shrinking – for two consecutive quarters, that’s a recession.

GDP was down 1.6% in the first quarter. In the recently released second-quarter numbers, GDP was down 0.9%. Although we won’t get the final revision until September, if you take this at face value, we could very well be in a recession at this moment. However, there are a few problems with relying on this metric as the oracle of recession.

One is that this metric tends to work better as an indicator of recession in economies that are largely based around the production and export of goods. The U.S. has been an importing economy for many decades now when it comes to goods. However, we live in a very services-based economy. While we have a national deficit in terms of trade, we have a fairly sizable surplus when it comes to trade in services. A lot of our value comes from intellectual property, which doesn’t really factor into GDP.

In addition to the goods problem, there is also the fact that even within GDP, many of the indicators that go into the reading were still positive. Consumer spending was up, which is the biggest indicator of how people are actually feeling about the economy right now that exists within the GDP.

The things that were down in GDP were residential investment – home buying – as interest rates are up. Additionally, companies over ordered back in the throes of the pandemic when we were voraciously consuming goods. Now as we go out more places and consume more services, inventories are being sold off before they order more.

Beyond the problems with GDP, it’s only one indicator. There are lots of others that are also helpful. For example, one of the first things you might look at in determining if there was a recession is employment. Although this has slowed slightly, jobs are still being added to the economy every month, which is inconsistent with a recession.

So if you don’t go by GDP, what’s the alternative? Economists prefer to take their cues from the Business Cycle Dating Committee (BCDC) of the National Bureau of Economic Research. It defines a recession as a significant downturn in the economy that goes across sectors and lasts longer than a quarter.

The committee looks at a variety of data points including GDP and employment when making recession determinations. For this reason, it’s considered a much broader view of where things stand.

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Are We In A Recession?

I’m going to be brutally honest. I refuse to stake my reputation on answering this question. There are two reasons for this: One, it’s really hard to know in the moment. Second, it’s probably not even the right question. How likely is it that you’ll be able to do things based on this knowledge that have a meaningful impact on your business?

Whether you subscribe to the BCDC or GDP school of recession indicators, there is one fundamental flaw: Any data you can look at has already happened. So this makes it horrible for prediction. At the same time, without data, you could flip a coin and have just as good a chance as anyone else at giving an accurate answer on economic conditions.

The reality is that by the time a recession is declared, you’ve been living in one. We’ll get to this in a minute, but the last recession was so short that it may have been over by the time anyone was sure it happened.

The real question is do people think we’re headed for recession or do they anticipate things getting better? The reason for this is that what people think influences behavior of consumers, which is something your business can act on.

If enough people think recession or expansion is coming to the economy, there’s the potential that a self-fulfilling prophecy could be created. If the public expects the economy to take a turn for the worse, it might save more and spend less. In turn, businesses that were relying on that spending might have to lay people off. If this happens in enough areas of the economy, you have a recession.

In contrast, if you feel good about where the economy is headed, you’re going to buy that house or car, take that Florida vacation. This creates jobs and wealth, leading to an expansion of the economy.

The question isn’t what’s actually happening or happened in the economy, but what people think is going to happen.

Why The Concern About A Recession Now?

Inflation is up 8.5% in July on an annual basis according to the Consumer Price Index (CPI). Although down slightly from a peak of 9.1% in June, it’s definitely running hot.

The Federal Reserve prefers to look at a different measure of inflation, referred to as Personal Consumption Expenditures (PCE). In this metric, when excluding food and energy which can be highly volatile, prices were up 6.8%.

The Federal Reserve is currently moving the federal funds rate, the rate at which banks borrow from each other overnight, as its most potent tool to combat inflation. The rate has risen 2.25% since March to a range of 2.25% – 2.5%. Banks pass this cost of doing business through to consumers and all interest rates tend to rise.

The idea here is that if it’s more expensive for consumers to borrow money, they’ll save the money they have, perhaps encouraged as well by earning (slightly) higher interest rates on their checking and savings accounts. If money is no longer cheap, people will be more likely to hold onto it rather than spend ever higher amounts for the same amount of goods and services.

However, the Fed is also really trying to thread a needle here. It wants to slow spending enough to bring prices back in line with a more normal level of demand not goosed by American society participating in corrective shopping therapy at the beginning of the pandemic. It also doesn’t want to cool the economy so much that businesses lay people off and trigger a recession.

The phrase the Fed is using for what it’s trying to accomplish is “soft landing.” The Federal Reserve is like a stuntman. This scene calls for the economy to jump off a building, and the goal is to hit the giant airbag without breaking anything.

What does missing the airbag look like? Well, there are a couple of scenarios. Let’s look at what would be a trip to the emergency room with a couple of broken bones and what would be a life support situation. OK, I promise I’m done with the metaphor.

In the first case, inflation comes down, but the Fed pushes the economy into a recession of some duration in order to get there. It’s not good and there would undoubtedly be some pain, but these things tend to go in cycles, and we would recover eventually.

What the Fed absolutely doesn’t want to see is the economy going into recession while at the same time inflation continues to spiral upward. This is a condition known as stagflation and it’s the worst-case scenario. The economy would be like a patient experiencing all the bad side effects of some medicine without any of the relief for the illness it was supposed to treat.

What’s the hope of the Fed throughout this process? Well, some of this is psychological. Earlier, we talked about self-fulfilling prophecies in recessions. This is also at play when we talk about inflation.

One of the things the Fed tracks closely is public inflation expectation. If the public expects prices to rise dramatically in the short-term, they’re more likely to buy now before prices go up. The problem with that is that much of the reason for current inflation is that there is a shortage of supply to meet demand. Buying now just makes things worse.

If, on the other hand, the Fed can convince people that it has inflation under control and prices will come back to Earth, businesses will stop increasing and may lower prices. They’ll have to see sales slow for a while before they do this, but the hope would be that this allows time for supply to catch up with the reset level of demand.

What Happened During The Last Recession?

Whether or not the Fed causes a recession this time around, we will have periods of recession in the future because economics is cyclical. In the long run, there is a trend toward expansion and prosperity throughout history, but it’s not an unbroken straight-line. There are peaks and valleys.

With that in mind, what can we learn from the last recession that might give us some insight into future recessions? What should be taken with a grain of salt?

What Led To The Last Recession?

The last recession wasn’t that long ago. The National Bureau of Economic Research measures a recession as the time between the peak of an economic expansion and the low point of an economic downturn.

The last recession was a relatively short one, happening between February – April 2020, resulting from COVID-19 economic shutdowns.

What Happened In Business?

In the vast majority of recessions, it’s a slow downward slide. With this one, the pain was sharp and immediate. There is a fairly heavy collection of economic data from regions around the country called the Beige Book that’s released by the Federal Reserve. The one for April 2020 reads like an economic nightmare.

Among the lowlights were the following:

  • Mandated retail store closures
  • Extreme drops in leisure and hospitality demand
  • Severe dips in manufacturing
  • Construction projects froze for a while
  • Agriculture problems including shutdowns at meat processing plants
  • Energy demand cratered

While it was ugly, there were a couple of things the government did to support consumers and the economy:

  • The Paycheck Protection Program insured millions who would otherwise be working if it weren’t for business closures still received a paycheck through loans to businesses.

  • The first of what would ultimately be three rounds of economic impact payments help millions of qualifying Americans to get by during the pandemic and give them spending money to be put back into the economy.

  • At the same time, the extra money given Americans was also put in the bank at a historically high rate. One study from the Kansas City Fed shows that personal savings surged from 7.2% in December 2019 to 33.7% of paychecks in April 2020.

The Federal Reserve also did a couple of things to help:

  • First, it dropped the federal funds rate to near zero, which made borrowing extremely cheap for both businesses and consumers.

What Happened With Mortgages?

When the pandemic hit, everything kind of froze in the housing market. Stay-at-home orders had a profoundly negative impact on home sales in the early part of 2020. Sales were down 17.8% year-over-year in terms of existing home sales as of April 2020.

On the new home sales side, these were down 9.5% year-to-year in March and bounced back slightly in April. It’s worth noting that most home sales are for existing homes because they’re cheaper.

The boom that happened in home sales later in the year can be traced back to a few things:

  • A certain amount of home buying was always likely to take place because there’s always a home buying season, even if this one was delayed.

  • People who were stuck in their home for months at a time suddenly realized that their current home no longer fit their lifestyle and wanted to downsize or find more space.

  • We mentioned earlier that the Federal Reserve slashed the Fed funds rate. It also bought copious amounts of mortgage bonds to help keep interest rates low because housing is a major part of the economy. This helped interest rates fall almost a full percentage point on the 30-year fixed throughout 2020.

What Might This Mean For The Next Recession?

After “social distancing,” the other word we all got very used to hearing in reference to the pandemic was “unprecedented.” Officials went out of their way to tell you there was no playbook for this.

If we do end up in a recession again, the depth and the response to it likely won’t be as severe because the government won’t be shutting down everything at once in order to protect our health. So it’s fair to expect that we might use some of what worked during the pandemic to juice the economy, but it’s hard to make any predictions in terms of scale. This was (hopefully) a once-in-a-lifetime event.

What’s Likely To Happen In A Recession?

If we do head into a recession, it’s hard to calculate any kind of timeline because every one of these is different. I’m also not Nostradamus and I’m going to try to stay away from crazy predictions. However, there are some things that happen when people are worried about the economy.

Business Impacts

  • Savings will likely go up, with discretionary spending falling. If people think they’re facing economic headwinds, they’ll save more of their money and spend less of it at businesses.

  • Businesses will be forced to make smart workforce decisions. If there’s less money coming in, business leaders will need to make sure their people are adequately allocated to the right initiatives – for the business to weather the changing environment.

Mortgage Impacts

  • Mortgage rates may come down. One way to stimulate any economy out of a recession is to make consumer borrowing rates cheaper to encourage people to spend. Mortgage rates would likely drop if the Fed decided to lower the Fed funds rate again.

  • Home prices may moderate. With people looking to be judicious in the way they spend their money, it may be that home prices drop a bit in order to find the demand. Either way, it’s probably a safe bet that they won’t keep rising at the rate we’ve seen since coming out of lockdowns.

Either of these impacts mean good things for your relocating employees, so a recession doesn’t need to be a huge wrench in your workforce plans.

What Does All This Mean For Relocating Employees?

One thing to keep in mind is that we don’t know when a recession is going to hit (hopefully not for a while). Given this, it’s wise to realize that there is no predicting the future. There are resources you can give your employees to protect themselves against it, though.

This will be helpful because it’s an extremely competitive market out there right now. Supply in the market is a scant 3 months for existing homes. The market is considered in balance when there’s about 6 months’ supply.

This has contributed to elevated home prices. Although down slightly recently, the annual rate of return according to the Case-Shiller Home Price Index was still up 20.5% as of May 2022.

The Bottom Line

If you have concerns about an upcoming recession and how it impacts your plans for retaining and mobilizing your workforce, your concerns are understandable. However, the timing of recessions is also incredibly hard to predict. Given this, you just have to make the best decisions you can every day for your business.

The good news for mobility managers is that a recession might actually ease some of the pressure that your transferees would otherwise be feeling in the housing market. Home prices might ease up and mortgage rates could be more favorable.

Changing conditions are hard to keep up with. Let us help! Connect with our Rocket Mortgage® Relocation Team at


Kevin Graham

Kevin Graham is a Senior Blog Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Rocket Mortgage, he freelanced for various newspapers in the Metro Detroit area.