The word crops up with increasing regularity in everything from kitchen counter conversations to national news reports. For now, though, there are more questions than answers about the possibility of a recession.

When could a recession occur? How severe will a recession be if one does occur? How long will it last? Most important here in the Grand Valley: What will be the effects on local businesses small and large?

By one definition, a recession constitutes a decline in gross domestic product — the broad measure of goods and services produced in the country — for two consecutive quarters. For those keeping score, GDP retreated 1.6 percent in the United States in the first quarter and nine-tenths of a percent in the second quarter.

But like just about everything else that’s followed the COVID-19 pandemic, the so-called new normal isn’t particularly normal. 

Consider, for example, the latest report from the U.S. Bureau of Labor Statistics. Nonfarm payrolls increased an estimated 528,000 between June and July even as the unemployment rate slipped a tenth of a point to 3.5 percent. Both employment and the unemployment rate have returned to pre-pandemic levels. Consider, too, such other indicators as rising income and increased retail sales. 

Still, the Federal Reserve keeps raising its key short-term interest rate to curb inflation. The move could not only slow the economy, but push it into recession.

Other indicators on the economic dashboard flash red. A glance at the list that appears in the Business Times shows declines in the Consumer Confidence Index, Leading Economic Index and Small Business Optimism Index. The Conference Board, the New York-based think tank that calculates the first two of those indexes, expects a recession could begin later this year or early next year.

In Colorado, business leaders responding to the latest survey pushed the Leeds Business Confidence Index down 12.8 points heading into the third quarter. At 41.1, the index dropped below growth-neutral 50 to its fifth-lowest reading ever. Almost 23 percent of the leaders who responded to the survey said they believe the U.S. is already in a recession, 30 percent said they expect the economy to slip into recession in the second half of this year and 27 percent the first half of next year.

Nathan Perry, an economics professor at Colorado Mesa University who tracks trends in Western Colorado, reported in a presentation in June that if a recession doesn’t occur by the end of the year, then at least slower growth is likely for the next six to nine months.

On the other hand, there’s encouragement to be found in rebounding labor markets on national, state and local levels. In Mesa County, payrolls have grown 4.3 percent over the past year even as the market has remained tight.

Inflation and higher prices for gasoline and food could alter the trend.
But consumer spending, which accounts for more than two-thirds of economic activity, remains mostly resilient. Tax collections, a measure of retail sales, increased in June on a year-over-year basis 10.1 percent in Mesa County and 8.5 percent in Grand Junction.

Uncertainty is bad for business. There’s been no shortage of that for more than two years. But when it comes to recession, perhaps a little uncertainty over timing and degree remains better than the alternative. And that’s the certainty a recession, or worse, could present yet another obstacle to businesses.