So, Dean, I'm going to start with a very basic question that a lot of people have on their mind right now.
Do you think that we are heading towards a recession?
Well, I've been an optimist on this, but a little less optimistic in the last couple days.
Dean Baker is an economist at the Center for Economic and Policy Research, and we wanted to talk to him today because lately the news about the economy has been getting a little scary.
A lot of people are now thinking recession.
We're going to see the biggest squeeze on household incomes we expect since records began.
Wage inflation running at close to 6% rate and the tightest labor markets we've ever seen in our country.
And that suggests that, unfortunately, it now looks like a recession is right around the corner.
It's important to understand that recessions don't just happen.
Every recession we've had since World War II has either been brought about by the Federal Reserve Board raising interest rates and going too far, alternatively, by a collapse of the asset bubble, which was the housing bubble, of course, in 2008, 2009, and then the stock bubble in 2001.
We don't have any asset bubble that's about to burst.
I'm not worried about that. So the real question is, is the Fed going to go too far?
Today, we ask liberal economist Dean Baker the big question about the economy right now.
Are we heading towards a recession?
And if so, what do we regular people do to prepare?
Technically, a recession is defined as two quarters of negative growth.
That's basically the conventional view.
But what we're really talking about is a big rise in the unemployment rate.
That's why people care about a recession.
The worry is that the unemployment rate could rise and possibly rise a lot.
So we've been very fortunate. We have a 3.6% unemployment rate.
It came down very rapidly following the pandemic recession.
But when the Fed starts raising rates, that is going to raise the unemployment rate.
If they just raise it a little bit, maybe it's not that big a deal, but if we go back -- People keep referring to the Paul Volcker years when Volcker raised rates.
They peaked at 20%, and that pushed the unemployment rate into the double digits.
So that's the sort of story that I think I and most people are very fearful of.
So raising rates somewhat to slow the economy, maybe that's necessary, appropriate, but raising rates enough to give us the sort of recession we had at the start in the 1980s, that would be really bad news.