Pete Hegseth talks about troop deployments, the Strait of Hormuz and the end of the Iran war
Pete Hegseth answered reporters’ questions about troop deployments, the length of the Iran war, and the Strait of Hormuz.
As rising gas prices hit consumers’ wallets, Americans already looking for cheaper fuel may soon face an even bigger challenge: preparing for a potential recession.
A Moody’s Analytics model shows inflation expectations and the probability of a recession rose in March due to a surge in oil prices stemming from the Iran war. Mark Zandi, the company’s chief economist, said in a note that even before the war began, the company’s model had increased the probability of the U.S. going into recession over the next 12 months to an “uncomfortably high” 49%, essentially a coin toss.
Other companies are less likely to fall into a recession. Oxford Economics puts the probability at 30%, but Matthew Martin, senior U.S. economist at Oxford Economics, said if oil prices remained above $140 a barrel, there would be enough pressure on economic growth to push the economy to 1 barrel.
Brent crude, the world oil benchmark, hit $117 per barrel on March 31st.
“I don’t think anyone, certainly the U.S. economy, is going to win if the war is prolonged,” Martin told USA TODAY. “The longer you use it, the more likely something is to break.”
What would it take for the United States to fall into recession?
Martin said the prolonged Iran war, now in its fifth week and nearing the end of the Trump administration’s original four-to-six week schedule, will have the biggest impact on whether the U.S. enters a recession this year.
Martin still expects the dispute to be resolved within the next month or two, but said if oil prices remain high for an extended period of time, consumers who need to drive will have to bear the higher gas prices and therefore cut spending in other areas. Oil is part of nearly every supply chain, so continued high costs could ultimately drive up prices for nearly everything and cause consumers to cut back on spending even more, he added.
“There are some companies that aren’t seeing as much demand right now, and there’s probably more uncertainty as well, so overall employment rates could fall further,” Martin said. “As unemployment rises, demand is expected to fall further as people lose income, which could lead to a chain reaction of destruction.”
He added that a prolonged conflict would likely cause stock prices to fall, potentially pulling back even high-income earners who have been the main drivers of consumer spending.
“If the economy withdraws, middle- and low-income households will also be affected by higher prices. It’s going to be a bit of a storm that the economy may not be able to weather,” Martin said. “It will eventually cause a recession.”
What can Americans do to prepare for a recession?
Miklos Ringbauer, a certified public accountant in Los Angeles, advises his clients to build up an emergency fund. The conventional wisdom is to save three to six months worth of expenses. During a recession, it often takes time to find a new job, so Ringbauer suggests saving for a year.
He advises people who don’t have savings and may have to rely on credit cards to take the time to review the interest rates on their cards. You’ll have to pay the money back anyway, but a 0 percent introductory interest rate for one year is better than a card that charges 20 percent interest from day one. Remember to read the fine print.
Although we can’t control gas prices, some Americans are finding ways to lower their gas prices. Turn the pages of their book, brave the long lines at Costco or Sam’s Club, and download the GasBuddy mobile app to track prices and take advantage of our fuel rewards program.
Ringbauer said each decision should depend on individual circumstances.
“As long as there’s a trade that works for you and it fits your forecast, by all means do it today, because as we’ve seen over the last few years, everything will be more expensive tomorrow,” he said, adding that sometimes it makes sense to wait. “For example, if there is a recession, more people will lose their jobs in the process. There will be more foreclosures. Then you might be able to buy properties that are in foreclosure.”
Who decides when the United States enters a recession?
The call was made by eight economists who serve on the Business Cycle Dating Committee at the National Bureau of Economic Research (NBER), a nonprofit research organization independent of the federal government.
They are appointed by NBER President James Poterba, who has held the position since 2008, after consultation with the committee chair and the nonprofit’s board of directors.
The commission has maintained a timeline of U.S. business cycles since its creation in 1978. In the absence of an alternative timeline compiled or published by the U.S. government, the commission became the go-to source for officially identifying recessions.
First of all, what is the definition of recession?
The NBER defines a recession as “a significant decline in economic activity that spreads throughout the economy and lasts for more than a few months.” According to the NBER, three separate criteria must be met to some extent to officially identify a recession: depth, breadth, and duration.
The committee considers several factors in making its decision, including inflation-adjusted income excluding government benefits, salaried employment, consumer spending, industrial production, and gross domestic product.
“Most, but not all, recessions identified in our procedures consist of two or more consecutive quarters of decline in real GDP,” the NBER explains on its website.
How quickly does the NBER determine that the U.S. is in recession?
The most recent and shortest recession in modern history was during the COVID-19 pandemic, which lasted from February to April 2020.
The NBER identified a recession in June of that year, several months after it began. It took another year for the NBER to announce in July 2021 that the recession ended in April 2020.
The NBER says other recessions have taken between four and 21 months to determine. There are no set timing rules. The NBER says the committee will wait until it can confirm with confidence.
“Most people don’t realize they’re in a recession while it’s going on,” said Dean Rylkin, chief executive of Cardiff, a small business lender. “It doesn’t feel like a switch has been flipped; it manifests itself unevenly, through layoffs in certain industries, tight credit, slowing activity, etc. By the time it’s officially called, it’s often already obvious in hindsight.”
Contact Rachel Barber at rbarber@usatoday.com and follow her at X @rachelbarber_
