Taking an alternative view of recession — ‘Slowcession’

There is an alternative view of recession and a new term known as “Slowcession,” which was coined by Moody’s Analytics Chief Economist Mark Zandi in January 2023 to describe the state of the U.S. economy.

A recession is defined by experiencing two consecutive quarters of negative Gross Domestic Product (GDP) growth. Typically, a recession means company profits get squeezed and large numbers of people lose their jobs. But not every recession is the same. Some are deeper and longer-lasting than others.

What is ‘Slowcession?’

“Slowcession” is a play on the word recession where the words “slow” and “cession” are combined to describe an economy that is sluggish, but not in a downturn. “Slowcession” describes an economic scenario where the economy scarcely grows and where economic growth slows to almost a halt, but does not turn negative as in a recession.

A “Slowcession” is characterized by faltering growth and higher unemployment without the economy entering negative territory. However, it is viewed as a preferable alternative to a recession because, unlike with a recession, economic growth is not negative and there is just about enough activity to keep the economy growing. However, there is also a lot of uncertainty and caution, which can limit spending, affect earnings and put people out of work.

What lies ahead?

The real question now is: “Will this sluggish economic growth lead to an upturn, downturn, or sustained period of identical growth?” The answer is “it depends.” A lot depends on sentiment. If inflation is bridled and confidence returns, GDP growth could gradually begin to rise. Or, on the other hand, sluggish growth could lead the population to believe a recession is around the corner, which will scare people into spending less and businesses into laying off staff and ceasing investments.

There are some reasons for optimism that the economy will not go into recession in 2023, including:

• Inflation will moderate in 2023 before severely negatively impacting the economy. Inflation declining from around 6 to 7% now

• The supply chain disruptions will begin to ease. Shipping days have fallen from 111 days to 80 days

• Aggressive interest rate