The downturn could have started sometime around last October, a former Federal Reserve advisor has said<\/p>\n\n\n\n
The United States may already be in a \u201cplain vanilla recession,\u201d a former advisor to the Federal Reserve Bank of Dallas, Danielle DiMartino Booth, told CNBC on Monday. The statement comes as world stock markets nosedive over fears the US economy is weakening.<\/p>\n\n\n\n
A cyclical or plain vanilla recession is one of the two types of demand-driven recession. These typically follow periods of policy tightening that are aimed at staunching excess demand or inflation problems.<\/p>\n\n\n\n
According to DiMartino Booth, CEO and chief strategist for Quill Intelligence, the recession started sometime around last October. She pointed to a weakening job market and increasing Chapter 11 bankruptcy filings. Additionally, she said declining housing prices and increasing apartment supply suggest this trend may continue.<\/p>\n\n\n\n
The US economy suffered an unexpected setback in July as hiring fell sharply and the unemployment rate rose for the fourth straight month, with raised interest rates taking a toll on businesses and households.<\/p>\n\n\n\n
The jobless rate jumped to 4.3%, up from 4.1% the previous month, the Bureau of Labor Statistics reported on Friday. The figure is the highest since the onset of the Covid pandemic in 2020.<\/p>\n\n\n\n
The number of unemployed people across the US rose by 352,000 to 7.2 million, a notable increase from the 5.9 million registered a year earlier, when the jobless rate was 3.5%.<\/p>\n\n\n\n
Friday\u2019s report added further fuel to mounting concerns that the Federal Reserve has waited too long to cut rates. US recession worries roiled<\/a> global markets on Monday.<\/p>\n\n\n\n The Fed last Wednesday opted to keep its benchmark interest rate in the 5.25%-5.50% range, where it has been for more than a year. Fed Chair Jay Powell indicated that the first rate cut of the post-pandemic era could come in September.<\/p>\n\n\n\n DiMartino Booth told CNBC the Fed is not entirely to blame for the high levels of inflation, claiming that the \u201cinterest rate policy is a blunt instrument.\u201d She noted however that it owned over one-quarter of the mortgage-backed securities market coming out of the post-pandemic era, giving its policies a hand in the run-up to the current inflation level.<\/p>\n\n\n\n The former Fed insider also pointed to artificial intelligence (AI) as a key tool for employers looking to slash costs, suggesting that \u201cfor the next six to 18 months, AI is going to\u2026 feel like a weapon of mass destruction\u201d when it comes to layoffs.<\/p>\n\n\n\n