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CARL AZUZ: Economic experts are increasingly sounding the alarm
about a possible recession.
What that is and why it matters are
our first topics this Tuesday.
I'm Carl Azuz.
A popular definition of recession
is two consecutive quarters of decreasing economic growth.
Sounds technical and maybe not something of major concern,
so why is it?
A healthy economy is always growing.
It's always expanding.
So if you have at least two quarters in a row, basically
a six-month period or more when the economy is shrinking,
you're likely to see companies' sales
drop, gross domestic product drop, exports drop, people
losing jobs and having trouble finding new ones,
and consumers spending less money on goods.
That's not all happening right now.
The US economy did contract or shrink in the first quarter
of this year, but consumer spending was strong
in the winter and early spring.
And the jobs picture is overall a good one.
The unemployment rate is very low,
and the economy has added 400,000 jobs or more
in each month of 2022.
These are some reasons why President Joe Biden said
last month that he wasn't concerned about a recession
any time soon.
However, there are economic storm clouds over America.
Inflation is a big one we've talked about.
The jump in prices of many things
we buy hit their highest levels in decades last year,
and they've only gotten worse since then.
The president's critics blame his policies
for driving up oil prices, which are a major factor
in inflation, and they say government spending
from the $1.9 trillion COVID relief
package he signed last year also caused inflation to get worse.
That package came in addition to those passed during the Trump
administration.
Inflation is expected to be a major issue in the upcoming US
midterm elections, one that could hurt President Biden's
fellow Democrats, who currently control
both chambers of Congress.
America's central bank, the Federal Reserve,
says keeping prices in check is really its job, not
the president's, but even the Fed's been criticized
for its response to inflation.
CHRISTINE ROMANS: Has this booming pandemic economy
run out of steam?
Despite widespread job growth, a housing market frenzy,
and a monster gain on the S&P 500
last year, many economists and CEOs now warn
a recession could be looming.
As the Federal Reserve tries to tame high inflation
by aggressively hiking interest rates, even the head of the Fed
himself admits central bankers probably
should have acted sooner.
JEROME POWELL: Hindsight says we should have moved earlier.
We're going to use our tools, and we're
going to get this done.
CHRISTINE ROMANS: Now the challenge for the Fed is this--
slowing the economy enough to get inflation under control,
but not so much that it lurches into recession.
It's the search for the so-called "soft landing,"
but it won't be easy.
BILL DUDLEY: The chances of pulling off
are very, very low because they have to push
up the unemployment rate.
And in the past, when you've pushed up the unemployment
rate, you've almost never been able to avoid
a full-fledged recession.
CHRISTINE ROMANS: As recession fears grow,
investors are dumping stocks and other risky assets.
Everything from the tech sector, to retail stocks, to Bitcoin
has plunged.
Other factors, like Russia's invasion of Ukraine
and COVID-19 lockdowns in China, they
aren't helping the outlook.
So if the US economy does slide into recession,
what shape will it take?
There's an alphabet soup of possibilities.
The V-shaped curve is the best-case scenario.
It's a sharp drop followed by an equally sharp recovery.
Often, that results from a one-time shock to the economy,
like we saw at the beginning of the pandemic.
The U-shaped curve is a more drawn-out
recession that takes a few years for GDP to fully recover.
Now that occurred in the mid 1970s
during the oil crisis and a period of stagflation.
Then there's the dreaded L-shaped,
or hockey-stick recession.
That's the worst case.
That's when a prolonged recession turns
into a full-blown depression.
The Great Depression is a classic example.
But some economists argue the financial crisis, which
started in 2007 and took nearly six years for a full recovery,
also met that L-shaped definition.
There's also the W, when the economy
bounces back quickly, only to slide
right back into recession.
And finally, there's the K. Now, that's when different sectors
of the economy rebound more quickly than others,
creating two separate recovery lines.
Some economists argue that's what really happened
after the start of the pandemic, when
low income-workers were the last to feel the economy come back.
That's a lot of letters, but remember,
a recession is just a possibility at this point.
Still, it's one economists are treating very seriously.
KEN ROGOFF: I was talking to a bunch
of professional forecasters the other day,
and one after another said they can't remember an environment
where it was this uncertain.
The lockdowns in China on top of an already fragile economy, war
in Europe, galloping inflation in the United States,
you have the makings of a perfect-storm global recession.
It's a risk.
It's not a certainty, but it's a pretty scary risk.
CHRISTINE ROMANS: A risk that American families are
increasingly beginning to fear.
CARL AZUZ: 10-second trivia.
Speedee was once a mascot of which restaurant chain?
Checkers, Wendy's, Steak 'n Shake, or McDonald's?
[countdown timer beeping]
In the 1950s, Speedee smiled on signs in bags for McDonald's.
In Russia, hundreds of foreign companies
have cut back on operations, suspended them for the time
being, or quit doing business there
altogether since Russia's military
invaded Ukraine on February 24.
McDonald's, which had temporarily
shut down almost 850 restaurants in Russia,
just announced it's leaving the country for good.
The burger chain says the humanitarian crisis
caused by the war in Ukraine plus an unpredictable operating
environment contributed to its decision
to sell its Russia business.
The jobs of more than 60,000 employees are now in question,
and McDonald's could take a hit as its 955 locations in Russia
and Ukraine combined accounted for 9% of its revenue
last year.
The decision closes the door on more
than 30 years of McDonald's operations in Russia.
Here's a very different-sounding CNN report from 1990
when that door was opened.
- In a dismal season for the Soviet economy,
a golden vision of hope on the horizon?
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- Stay tuned for cnn.com.
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- Wednesday, after a dozen years of preparation,
McDonald's opens its largest restaurant in its 52nd country.
Payment in rubles only, unlike the new hard-currency
stores which have made life seem better
for foreigners and privileged Russians
but left the great majority resentfully out in the cold.
Inside, room for 700 with an international motif
that combines Big Ben with Big Mac.
For the novice, instructions on what to order
with your cheeseburger.
Maybe a milkshake luring in the name [russian] cocktail--
ice cream cocktail.
600 young Soviets have had a month
of training in a way of working unfamiliar
to the Soviet Union--
fast and hard.
The usual order of the day here is the service with a snarl.
But McDonald's has set out to change that
with a zeal, partly missionary.
GEORGE COHON: We're certainly going to make money here.
We're not evangelists.
So it's sort of neat to see the young crews
and to see them smile and to say, thank you.
Please come back again.
- And the Soviet kids in uniform sure look like converts.
- They're very nice.
They're all smiling.
And, as you know, in Moscow, not in every restaurant
you can find smiling people.
- A meal here will cost two or three
hours' wages for the average Soviet citizen,
but he may think it's worth it.
Here's the competition-- a place that sells pelmeni--
meat-filled dumplings, guaranteed to stay with you.
Muscovites are used to queuing up for something to eat.
The difference at McDonalds is they promise
there'll be something left when you
get to the head of the line.
[electric guitar riff]
CARL AZUZ: Two weeks ago, we told
you about the longest glass-bottomed bridge
on or above the Earth.
Today, we're taking you across the world's longest suspension
footbridge, which stretches for a little under half a mile
but over a deep mountain valley in the Czech Republic,
about 312 feet over it.
It's mainly supported by six cables.
It took two years and almost $8.5 million to build.
Pedestrians say it gives a great view, but it does shake.
So if you're looking to shake a leg,
shake, rattle, and roll, shake it up, shake-your-groove thing,
shake, shake, shake your booty and hopefully not shake
anything off the bridge, it could be kind of fun
if you're not shaking with fear or shaking at the knees
after getting roped into a suspenseful, shaky bridge
shake off.
I'm Carl Azuz, and that about spans all the bridge puns
I got left.
Massabesic Middle School.
Shout out to our viewers in Waterboro,
Maine, for subscribing and leaving
a comment at youtube.com/cnn.
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