What the decline in GDP means for your wallet
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(NewsNation) —The U.S. GDP declined 1.6% in the first quarter of 2022, signaling a recession could be on the horizon as inflation and high gas prices continue to put American consumers in a bind.
If the second quarter of 2022 shows another GDP decline, it officially means the U.S. is in a recession.
So what is GDP and why does it matter to you? Economics expert Dan Roccato from the University of San Diego joined NewsNation’s “Rush Hour” to answer those questions.
NewsNation: We always hear about the GDP, but break down what it is and why it matters.
Roccato: “When people hear GDP and they think ‘economics class, I slept through that class,’ but it’s actually quite simple. It’s the total output of all of us together. So think of 340 million of us and my paycheck, your paycheck, everyone else’s and the goods and services we produce … that’s what GDP is.
NewsNation: Do you have an inkling we are heading to a recession?
Roccato: It certainly feels a little slower, doesn’t it. 70% of our economy is consumer spending, for the most part, even with high inflation consumers are holding up pretty well, but we’re starting to see cracks. We’re starting to see consumers pull back a little bit.
It’s easy to understand why. You need a second mortgage to fill your gas tank, for crying out loud. Every dollar we put in our gas tanks is a dollar we can’t spend somewhere else. That means it ultimately ripples through the economy and consumers eventually have no choice — they have to pull back a little bit.
NewsNation: What should the average person know about how to buffer themselves against a possible recession?
Roccato: The biggest risk to you and I going into a recession is our paycheck, is our job. Typically, during a recession, employers cut back. The best thing you and I can do is keep investing in ourselves, keep investing in our own personal capital, our skills, to make sure that we stand out when it comes to the job market. We can’t control interest rates, we can’t control inflation, but we can control our skill set and that becomes even more important if jobs become a little bit more scarce.
