[News Terms] Not a Recession, but Growth Slowing? What is a 'Growth Recession'?

"Pain of Water Drops Falling Continuously in One Spot"
Maintaining Economic Growth Rate Amid Economic Downturn Is Key

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), listens to reporters' questions at a press conference following the final Federal Open Market Committee (FOMC) regular meeting of the year held at the Federal Reserve building in Washington on the 14th (local time). [Image source=Yonhap News]

[Asia Economy Reporter Han Seung-gon] A growth recession refers to a phase where the economy experiences low growth below its potential growth rate without falling into a full recession. The term combines "growth" and "recession," indicating an economic state where there is no recession, but the growth rate is slowing down. For example, when the real economic growth rate adjusted for inflation remains positive but low, while the unemployment rate worsens, this low-growth phase is interpreted as a growth recession.

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), expressed concerns in the annual economic policy symposium held in Jackson Hole, Wyoming, on August 26, that "the U.S. economy may suffer as the Fed continues its war against inflation," which is understood in the same context.

In this regard, Bloomberg News analyzed that following Powell's remarks, there is increasing weight to the view that the Fed has effectively abandoned the goal of a soft landing to control inflation and is instead targeting a growth recession.

Diane Swonk, Chief Economist at KPMG, interpreted Powell's remarks at Jackson Hole as meaning "the Fed has realized it must give up hope for a soft landing and accept the necessity of a growth recession." She described a growth recession as "less shocking and less painful than a sudden recession, but like the pain of water droplets continuously falling in one spot."

Ultimately, the key to escaping a growth recession lies in how the economy can maintain growth rates despite the economic downturn.

This content was produced with the assistance of AI translation services.