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GDP report stirs up plenty of questions about the economy

St. Thomas economics professor Tyler Schipper answers some of the biggest questions.

MINNESOTA, USA — The GDP dropped for the second straight quarter, by 0.9%, a sign the "COVID rebound" is cooling off.

Secretary of the Treasury Janet Yellen said our economy is in a state of transition, not a recession, which has stirred up a lot of questions: Where is the economy at? Should I be worried?

So, we decided to gather those questions and find as many answers as we can.

University of St. Thomas economics professor Tyler Schipper is helping with those questions.

Severson: What is GDP and why is it so important?

Professor Schipper: GDP is our go-to on how much the economy is producing. So, think about adding up every good and service that was produced in our economy and it’s our aggregate measure, we’re adding all of those things up. We usually care about GDP as a measure about the health of the economy

Severson: Why is the GDP going down two quarters in a row a big deal?

Professor Schipper: Economists often operate under rules of thumb and one of the rules of thumb is when we have two consecutive quarters of negative GDP growth, that usually indicates a recession.

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But professor Schipper says that is only one rule, or measure, economists use. He says there are several other factors at play right now that complicate things.

He says the U.S. economy is also seeing high inflation, strong job growth and low unemployment.

Professor Schipper: Those pieces of data don’t fit well together in terms of what economists would typically talk about an economy that is in recession.

Severson: Should I be worried?

Professor Schipper: I don’t think it’s necessarily worrying in terms of you need to drastically change your lifestyle at this point.

Severson: What can I do to prepare if a recession is on the horizon?

Professor Schipper: Making sure that you’re paying off high interest debt or if you don’t have money set aside for an emergency fund, those are both really prudent personal financial things you can do. If you have high interest loans, especially on credit card loans, those rates are going to continue to go up. The typical credit card interest rate is going to typically be higher than any returns you are going to get in the market.

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