FORT WAYNE, Ind. (WFFT) - Money makes the world go round isn’t just a saying. We spend money and drive the economy forward.
After 128 months of economic expansion, the longest period of expansion since 1854, the National Bureau of Economic Research said on Monday that the United States is officially in an economic recession.
Economists say we began to see a slowing down of the economic expansion taking place in February.
The COVID-19 pandemic is believed to have been an accelerator of the recession.
Heather Tierney, Ph.D, assistant professor of economics at Purdue Fort Wayne says consumer spending is about 70% of our GDP.
"We are a heavy, heavily reliant economy on consumer spending and that’s proving to be problematic."
When the COVID-19 pandemic hit, businesses were forced to close.
People lost their jobs or had to take pay and hour cuts, which then reduced income, and many shops closed for safety, limiting wholesale-retail sales.
Seeing a reduction in those four areas, industrial production, real income, employment, wholesale-retail sales is how the National Bureau of Economic Research determines if we’re in a recession.
Northeast Indiana and Northwest Ohio’s economy is, in large part, industrial production.
Rachel Blakeman, director of the Community Research Institute at Purdue Fort Wayne says to turn things around, we have to rely not just on local economic recovery, but national as well.
"Not only do we make pickup trucks for people who buy them here in Allen County, we make pickup trucks that are bought across the United States," Blakeman said. "We want to make sure there’s a market for pickup trucks, for steel, for medical devices, for recreational vehicles. Those are some of the drivers of our local economy."
We have seen a slow improvement in one of the four areas, employment.
According to the latest jobs numbers, unemployment in Northeast Indiana for the month of April ranges anywhere between 15% to 29%, depending on the county.
Nationally, Tierney said the unemployment rate between April and May is expected to improve by about 1% from the current 14.4% rate.
Tierney says that’s partly due to the government.
"The Payment Protection Program turned out to be a success. So, employers started hiring back their employees, and also the stimulus payment," Tierney explained.
However, to turn the recession into expansion, Tierney believes battling COVID-19 to a point where people feel safe to go out and spend their money will be the key.
"We have to increase the flow of money within the economy because one person’s spending becomes another person’s income," says Tierney.
Historically, Blakeman says this recession is unlike any we've seen in modern times. She said, "This will be a point in time in economic history that will be studied for decades to come."
However, Tierney explained that if we do have to go back into lockdown, it’ll have a negative ripple effect on the economy and it could be even worse than it is now.