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Economic Shrinkage Signals Likely Recession 

Economic Shrinkage Signals Likely Recession 

The US economy shrank by a whopping 1.4% during Q1 2022, reports the Commerce Department, marking the worst quarterly performance since the early months of the pandemic. 

“You can’t read too much into this number, but I do have significant concerns about the risk of recession, both in the US and also in Europe and China, possibly all reinforcing each other like the perfect storm,” admits Kenneth Rogoff, a Professor of Economics at Harvard.

To compare, GDP increased by 1.68% from Q3 to Q4 2021 and dipped by 0.3% from Q4 2021 to Q1 2022. Overall economic growth for 2021 was 5.7%, the  fastest gain since 1984. 

The recent dip in growth is largely the result of labor shortages, supply chain issues, fading fiscal stimulus, and inflation that have inhibited the post-pandemic recovery many had hoped to see. Economists had actually predicted a GDP increase of 1.1% for Q1 2022.

“Todays shock drop in GDP is a wake-up call that the economy isn’t as strong as we all thought,” warns Chris Zaccarelli, an investor with Independent Advisor Alliance. “It’s possible that GDP gets revised higher next month, as this is just the first release and there will be two revisions, but it is a warning sign.” 

GDP growth can be hard to predict during huge swings in either direction, but nobody can ignore the rising cost of goods, services, groceries, and fuel. According to The Washington Post, prices have jumped by more than 8% during the past 12 months. 

Other factors at play include the war in Ukraine, a dramatic shift in US importing, and changes in retail inventory. US imports jumped by nearly 20% during the first 3 months of this year as businesses and consumers searched for cheaper goods overseas. Exports dropped by 6% during that same time frame, widening the trade deficit. 

In addition, many businesses purchased less inventory during Q1 2022 because they had plenty of merchandise leftover from a spending spree late last year designed to guard against supply chain disruptions. 

On a brighter note, business investment and consumer spending increased by 3.6% during Q1 2022 and unemployment dropped to 3.6% (the lowest since the start of the pandemic). Major credit card companies report robust spending, especially on vacation and international travel. 

“Huge miss on GDP this morning, but just looking at the headlines is misleading,” notes Cliff Hodge, an investor with Cornerstone Wealth. “We’d rate the report neutral overall. Trade, inventories, and government spending all dragged, but the consumer held up and business investment was strong.” 

Even so, the Commerce Department’s report bodes ill for those who fear the war in Ukraine could trigger a recession and the International Monetary Fund (IMF) has already revised its estimate for global GDP growth in 2022 from 4.4% down to 3.6%.

Speaking to representatives from the World Bank and IMF last week, Federal Reserve Chairman Jerome Powell admitted it would be challenging to tame inflation without harming the economy. “Our goal is to use our tools to get demand and supply back in sync, so inflation moves back into place, without a slowdown that amounts to a recession,” said Powell. “I don’t think you’ll hear anyone at the Fed say that’s straightforward and easy. It’s going to be challenging.” 

Whatever happens, the situation is sure to impact Democrats’ chances during the midterm elections. But when asked about the recent dip in GDP, President Joe Biden said he wasn’t concerned. “The American economy – powered by working families – continues to be resilient in the face of historic challenges,” he said, claiming the GDP figure was the result of “technical factors.” 

Republicans view the situation in a different light.

“Runaway inflation is crushing working American families on Democrats’ watch,” said Senate Minority Leader Mitch McConnell (R-KY). “No longer are Democrats just presiding over a disappointing recovery; now they’ve thrown the recovery into reverse, and they’re going backwards.” 

Editor’s Note: Biden has been claiming credit for the rebound of the economy are the massive pandemic dip. But he has not been able to sustain growth. Inflation is rampant, the supply chain hasn’t recovered and restlessness in employment (record numbers of people quitting) has added instability.

Remember, a recession is two quarters of declining GDP in a row. Technically, we are already there, but one more quarter will have psychological effects. And remember the Fed just raised interest rates by a half percent, which is usually done to slow down and overheated and inflationary economy.


US economy shrank 1.4% at beginning of 2022, marking worst quarter in 2 years 

Economy shrinks 1.4% in first 3 months of year, raising recession fear 

US GDP falls in first quarter as surging imports knock down growth 

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  1. Howard

    Thanks Joe. And Ben. And Frank. And all of the commie shitheads that helped the election get stolen.

    • Ben

      Howeird: Maybe it’s you asshats that believe The Big Lie as well as most of his 3,500 lies that fuckin borrowed and spent us into the shithole with the largest deficits and debt ever in the history of America while simultaneously cutting the revenue stream to pay for said deficits and debts via the tax cuts to the rich and big business who did not invest in America but just bought down their own stock. Four freaking years of financial mismanagement and misconduct and a year into Biden and it’s time to pay the piper. Payback’s a bitch and we all feel the pain you caused.

      Why commie? Whatever do you dumbshits mean when you say that? You don’t even know do you? Not a clue….

  2. David Dutra

    The economy was better under Trump. That does not mean that in any circumstance anyone should think it’s ok to put his failed admin back in office…

    • Ben

      My point was if you borrow like a whore, spend like a drunken sailor, while simultaneously taking in less revenue, then guess what —- there’s lots of money, No duh, you’re fucking printing it. Just like he ran Atlantic City into the ground.

      Trump propped up a balloon that had to pop at some point. You can’t cut taxes, increase spending, not get reasonable GDP growth, and expect the good days to last forever.

      Thecfact that the crows come home to roost during Biden’s administration it’s just an artifact of time even after Biden stopped borrowing at those rates, stopped spending at those rates, etc. first news is that with Ukraine, spending and borrowing is probably going to start going up again.

      Hopefully, he will put some order into the tax process as well. At the federal level, we are not gonna get out of this without some amount of increased revenues. Ultimately, we have a problem that will take decades to fix.

      Under Trump, GDP growth never met his promise, his expectation, or even a reasonable level. Deficits were some of the highest ever. So, like Biden‘s economy, trumps was uneven at best. Sure we all had money, but it was a false reality, a reality were waking up to now .

      • Theodore Sueck

        Oh, just like Biden’s been doing since day one? You really are an uneducated schmuck, aren’t you?

        • frank stetson

          Hmm. Think I will take this one from Ben.

          You would think you idiots would actually look before you put your foot in your mouth and your head up your ass. The following data is from The Balance with ultimate source being The US Treasury.

          revenue spend deficit
          2018 3,329.9 4,109.0 -779.1
          2019 3,463.4 4,447.0 -983.6
          2020 3,421.2 6,550.4 -3,129.2
          2021 3,580.8 7,249.5 -3,668.7

          2022 4,174.2 6,011.1 -1,837.0

          Following the Trump disaster budget years of 2020 and 2021, the first year Joe has effect, is 2022 is significantly BELOW Trump’s last two years for spending and defcit while Biden’s revenue intake is significantly higher. 2021 and 2022 are estimates. It is estimated that Biden will blow Trump away on a four year comparison given current expectations and forecasts. Pretty sure he already beats him on “average” year too. It is hard to see anyone being worse than Trump who replaces Herbert Hoover, another one-term wonder, as the worse ever for handling the US Budget. Otherwise, he would replace Trump as the worst money manager ever. And don’t blame the pandemic, that won’t fly. Plus, Biden has yet to have any effect on the tax rate, hopefully that will bring extra revenues in from business and people you don’t associate with the likes of you — the very rich.

          IMO —- Biden’s picture is still not good enough. Beating Trump is a no brainer, reducing the increase in deficit is a starting point but we have decades of work to do to make this better. It took to Reagan to fix the WWII debt, about 35 years.

          Hope that better educates you.

          PS: frankly, and I am Frank, I don’t care as much about deficit as I do debt/GDP ratio which sucks too. No one knows but debt being 100% of GDP is considered the witching hour, we reached that at the end of The Great Recession in 2014 as QE easing ended. In 1945, we hit it for 3 years, we have been in it for 8 years now and Trump fucked it up to 129% in 2020, while tapering it back to 124% in 2021. It is expected that Biden will continue this trend, but IMO not hard enough or fast enough. While this may seem a nuthin burger to you, it’s one of the prime ingredients for giving us a loan, sort of our ability to pay back. No one knows the real witching number when investors deem other investments safe/better than t-bills, but we know they are looking. Right now we might be the best game in town, but based on what Trump did, and where we are now, they are looking. Debt/GDP is like a clogged financial artery —- a silent enemy that kills in a heartbeat when triggered. And we have been given notice, we have a clog.

          Look it up, educate yourself Sueck-wad. And sorry, I am a very educated schmuck, tyvm.

      • Proud southerner

        Ben is pissed off because his idol is more demented than he thought. Spending like a whore? Leave your female relatives out of it

      • White

        Like a whore? What do whores borrow? Your mother’s wig?

        • ben

          “Leave your female relatives out of it” a yuck, a yuck, a yuck…..drole.

          White: subtle homage to James Nicoll for his famous quote: “The problem with defending the purity of the English language is that English is about as pure as a cribhouse whore. We don’t just borrow words; on occasion, English has pursued other languages down alleyways to beat them unconscious and riffle their pockets for new vocabulary.” Sorry, incredibly inside joke.

          But glad you focus on the issues. Firm grasp of the topic and all that.

    • Lloyd milam

      A very stupid post. Did you think that up yourself? Dumbass!!!!

  3. Ben


    Are we entertained?

    • Roger

      I am. Lloyd burned Ben