Following the release of a monthly economic survey from experts at Grand Valley State University’s Seidman College of Business, the upcoming economic forecast in the area indicates that the Grand Rapids area as well as West Michigan as a whole will most likely experience a shallow economic recession at some point in the near future.

Recessions in the West Michigan area typically last around six to nine months. It is important to note that when the economy begins to increase once again, technically speaking there is no longer a recession period, but the economy could take anywhere from a year or more to return to its original standing.

The United States has been able to maintain very strong employment numbers, keeping unemployment rates below 4%. However, there is still less output being produced than what is needed to keep up with the demand.

This is evident in the shortages of various products seen on empty shelves in supermarkets and limits on the number of specific items one person can get.

The contradicting part about the situation of United States economics is the overall economic output declining while the labor market is able to maintain consistency and strength.

Economics Department Chair Daniel C. Giedeman of the Seidman College of Business at GVSU said the economy is in a very unusual state following the COVID-19 pandemic. He said the way supply chains have been interrupted has caused an imbalance of America’s output, in addition to increased spending as people were released from lockdown and life began to return to the new normal.

“The Federal Reserve is still hoping they are going to be able to do a soft landing, to slow inflation down without actually causing the economy to go into recession, causing unemployment rates to go really high,” Geideman said. “That’s where the debate is right now, because the Federal Reserve has been raising interest rates for a number of months, and we’re still seeing the labor market be very strong, which is somewhat unusual.”

The Federal Reserve, controlled by a board of governors in Washington, D.C., essentially functions as a central bank system in the United States by regulating monetary policies and providing a nationwide fund for banks kept in reserve when in times of economic uncertainty.

Geideman predicts the Federal Reserve will take action to tighten the money supply, thus increasing interest rates and influencing people to spend less money.

“If you are a student, and you can pay a 5% interest rate in your credit card, you might be much more willing to buy stuff than if you had to pay a 25% interest rate,” Geideman said. “If interest rates go higher, (people) are going to be less likely to borrow, and that would decrease demand in the economy.”

Some factors that may impact the supply and demand chains are the geopolitical overlap, such as the Russian invasion of Ukraine causing higher energy prices, as well as job loss and the lowering of wages to compensate for harsh economic conditions.

Geideman doesn’t expect a devastating, lengthy recession like that of the 1970s, and advises students and community members to only worry about what is within their control.

“The US economy is resilient, and to be honest, recessions are just kind of a natural part of a market economy,” Geideman said. “Even though I might be a little bit concerned about what’s happened in the short run, I’m optimistic about the US economy in the long run again.”

Geideman speculates that the recession is just a forecast, which might not play out exactly as predicted.

GVSU students are already feeling the effects of rising inflation. Groceries are more expensive, along with high tuition rates, gas prices and rent payments. The possibility of a recession threatens their smooth entrance into the workforce.

GVSU student Josh Theeke, promotions officer for the Economics Club on campus, thinks the impending recession is inevitable.

“Essentially, due to the supply shock from COVID, the Fed and the government pumped money into the economy to increase activity,” Theeke said. “However, businesses and people were more resilient to the pandemic than what was expected and the excess cash flooded people’s wallets (increasing already high demand).”

Theeke believes that the recession will be more corrective rather than extreme.

“The uncertainty that worries a lot of people is how long it is going to take for the economy to return to normal,” Theeke said. “The Fed currently is struggling to lower inflation because the normal procedures are not seeing their usual results, so until prices go down and the economic growth rate returns to a normal and stable level, we will be in this corrective phase.”

The Grand Rapids Economic Forecast published on the GVSU Seidman College website also supports these theories, forecasting prices to rise from 5.9% to 7.3% for 2022, while wages are expected to increase by 4.4 to 5.2% for 2022.

The forecast predicts inflation to be around 2.7% this year, though there is a greater threat from inflation predicted for West Michigan.