A recession is 2 quarters of negative real GDP growth, i.e. a declining rate of domestic production of goods and services. We’ve already seen a strong decline in domestic production of housing and cars, and the ripple will soon spread to other sectors. I don’t know anything about the dollar or liquidity in a recession, or if there is a pattern. Commodity prices and oil prices drop in a recession, due to lower demand.
I think this quarter’s GDP growth will be 0 or negative, so we could actually be in the recession already. Unemployment peaks 1 – 2 quarters after a recession starts, and I expect a lot of construction and related layoffs in the next 3 quarters. Once current housing projects are complete, most of those workers will be laid off. We will have 800K laid-off construction workers in the US according to an estimate I read. It could be even more.
I don’t know how we got ourselves into a situation where we are so dependent on housing to keep our economy strong. It seems absurd that a great country like this, with the best financial and military systems in the world, derives its greatest productivity from building houses. You would think our productivity comes from exporting our technological advances in drugs, robotics, health care, alternative energy systems, educational methods, water treatment systems and other infrastructure products, mobile communication, and film making to developing and advanced nations. Why are we dependent on buying and selling homes to each other? Has it always been that way?
