The Economy

[HikerSpiker]

So what are everyone's thoughts? Are we in recession and should we be battening down the hatches?

It's an odd one though because unemployment is still very low.

Possibly. I think it was inevitable really

The news hasn't been great for a few weeks.

https://www.theguardian.com/business/2022/jun/17/fashion-brands-profits-hit-as-customers-return-worn-clothing-asos?CMP=ShareiOSAppp_Other

Technically think it’s 2 consecutive quarters of a fall in GDP. Whether we are now or not, it’s been predicted for a while that H1 in 2023 we will formally be in recession.

BoE already signalling interests rates of 3% and likely to get higher. Same in the US.

The fact unemployment is still low is part of the problem. The economy (among other factors) is based on supply and demand. There are major supply issues due to COVID/lower productivity and the war. However demand has remained high as people are employed hence rising inflation. The US has been talking a lot about “maximum employment”, they mean “optimal” employment.

Technically think it’s 2 consecutive quarters of a fall in GDP. Whether we are now or not, it’s been predicted for a while that H1 in 2023 we will formally be in recession.

The economy contracted in both April and May and the reports we are seeing don't indicate things will be any better in June. That would be one quarter of contraction. I guess it remains to be seen whether or not things pick up in July/Aug/Sept.

The fact unemployment is still low is part of the problem.

This is what I don't understand. My one adult experience of recession was 2007/8 which continued on and off to 2012.

The 2 big things I remember were unemployment shooting up (contractors having their contracts ended and then permanent staff being laid off). The other was house prices suddenly dropping. Neither of those things seem to be happening at the moment.

The housing market had started to slow down. I know anecdotally there are places where it's still hot, but UK-wide it's slowing down, which I would guess is the precursor to a drop (though who knows how much by).

As I said (very basically) 2 reasons low unemployment can be a problem is when there is a supply side issue but lots of people in jobs still creating demand that can’t be met = high costs. If there is only 1 bag of wheat and 10 people can afford to pay the price increases. If there are 10 bags of wheat and only 1 person can pay the price reduces. Somewhere between those 2 points is the more normal equilibrium.

Secondly it can also be because each employed person may not be contributing to increased productivity (in the economic sense) and therefore not meeting the supply demand. Example of this is furlough, but also people ‘at work’.

Secondly it can also be because each employed person may not be contributing to increased productivity (in the economic sense) and therefore not meeting the supply demand. Example of this is furlough, but also people ‘at work’.

Thanks, I get the supply - demand bit but not quite sure what you mean by this?

There has been a productivity issue with the UK for ages. Personally I don't think the economy really recovered from 2008, wage stagnation & little investment & growth. Now the shit is going to hit the fan.

Wage stagnation is quite shocking. I saw some stats the other day.

That said, until recently, the cost of food etc hadn't gone up much either. Although house prices and rents have shot up.

@TwinklingFairyLights

The issue of productivity is explained here:

www.investopedia.com/insights/downside-low-unemployment/

Thank you.

This talk of low unemployment seems to be rubbish to me, especially in light of the recent government rumblings about older people being economically inactive. From my own experience of trying to get back into my own area of education, and employment generally one you are over fifty, nobody will touch you with a barge pole

There won't be a recession in the usual sense. 2098 was caused by a liquidity issue, the banks literally ran out of money (thanks fractional reserve lending) and it spooked the investors. This time around liquidity isn't the problem, now it's people who have run out of money, and that's something which can be managed, to an extent. When it comes to inflation, the current response is, I think, questionable. Raising interest rates to take money out of the economy, when the drivers of inflation are beyond our control, seems largely futile.

I don't think there will be a housing crash either, the vast majority of mortgage holders are on fixed deals, and only a small number will be exposed to rate hikes in the near term.

The biggest issue we face in terms of our economy is going to come from AI, not inflation. I'm not a programmer, but I do have a passing interest, and keep an eye on various forums. What's coming down the line, and I mean within the next five years, will quite literally change our world. Remember before the Internet? A change of similar magnitude is coming.

Chat GPT is just a language model, it's "dumb" and only knows what you tell it. Yes, it can produce a fifteen thousand word thesis on some anachronistic aspect of molecular biology in just a few seconds, but it doesn't "understand" what it has done, and can't contextualise it. Artifical General Intelligence, or AGI (the "holy grail" of artifical Intelligence) is less than a decade away, according to most serious analysts.

AGI means a computer that is more intelligent than we are, it will be capable of not just writing your fifteen thousand word thesis, but also understanding what it has written, its context, how it can be improved and can then rewrite said thesis and make it infinitely "better". Now imagine the same thing with a string of code, you have a computer that can literally evolve by itself. That's why some in the industry are asking for a pause in AI development.

Conservative estimates are that AI will replace forty percent of jobs within a decade, that's worldwide, with no clear plan for what those people will do afterwards. The industrial revolution took 50 years to fully evolve and for new industries to be fully realised, in the meantime, alot of people went broke and hungry.

If you're now in your 40s, your retirement won't be anything like you have imagined.

I think a whole world of pain is coming. If your job involves significant amounts of "paperwork", your days are numbered, AI is coming for you.

2008 FML!