What is a ‘rolling recession’ and are we in one? Experts explain

By most measures, the U.S. economy is in solid shape.

Although the first half of 2022 started off with negative growth, a strong labor market and resilient consumer helped turn things around and give hope for the year ahead.

Gross domestic product, which tracks the overall health of the economy, rose more than expected in the fourth quarter, and the Federal Reserve is widely expected to announce a more modest rate hike at next week’s policy meeting as inflation starts to ease.

More from Personal Finance:
Almost half of Americans think we’re already in a recession
It’s still a good time to get a job, career experts say
If you want higher pay, your chances may be better now

Still, some portions of the economy, such as housing, manufacturing and corporate profits, have shown signs of a slowdown and a wave of recent layoffs fueled fears that a recession still looms. 

“There’s no scarcity of economists with strong opinions,” said Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chair of the White House Council of Economic Advisers. “There’s a lot of scarcity of economists with the right opinion.”

Rather than brace for an abrupt contraction, a “rolling recession” is already in progress, according to Sung Won Sohn, professor of finance and economics at Loyola Marymount University and chief economist at SS Economics. “This means some parts of the economy take turns suffering rather than simultaneously.”

In fact, the worst may even be over, he said.

A large portion of the reaction to the Fed’s moves has worked its way through the economy and the financial markets. Businesses trimmed inventories and cut jobs in some areas and consumers refinanced their homes ahead of rising rates.

“It is time to think about an exit strategy,” Sohn said.

“Expectations about a recession have been pretty inaccurate,” added Yiming Ma, an assistant finance professor at Columbia University Business School.

“This cycle has proven so many of our traditional theories wrong,” Ma said.

In fact, this could be the soft landing Fed officials have been aiming for after aggressively raising interest rates to tame inflation, she added.

But regardless of the country’s economic standing, many Americans are struggling in the face of sky-high prices for everyday items — like eggs, for example — and most have exhausted their savings and are now leaning on credit cards to make ends meet.

Several reports show financial well-being is deteriorating overall.

“For consumers, there’s a lot of uncertainty,” Philipson said. For now, the focus should be on sustaining income and avoiding high-interest debt, he added.

“Don’t plan any major future expenses,” he said. “No one knows where this economy is going.”