Is the U.S. Now Officially in a Recession?

Friday brought mixed news for the economy. While data from the Commerce Department inflation pressures remained high last month, the Labor Department's Employment Cost Index indicated a slowdown in private-sector wage growth for the third quarter. 

Even with a glimmer of hope, the Federal Reserve is still widely expected to bump interest rates another 75 basis points as the Fed works to get inflation under control. And with a recession looming, consumers are already adjusting their spending habits at the meat counter. 

"The short answer is yes, we're seeing consumer behavior change," says Glynn Tonsor, professor of Ag Economics at Kansas State University who also tracks consumers buying habits through the Meat Demand Monitor.

So, are we in a recession? Tonsor says that's something you can continue to debate, but it's more important to watch changes in behaviors versus debating the definition.

"It's easy to get caught up in the discussion and definition of a recession," says Tonsor. "I encourage us to hone in on his consumer behavior changing the way you phrase the question and it gets the right way. And price sensitivity, consumers are responding to price stronger than they were a year or two ago. And I think that's because real wages have declined, and when I say real wages, the cost of living has gone up more than what people are making. So there's a price squeeze or the financial belt has been tightened in a lot of households."

Tonsor says meat protein is one of several categories there's evidence consumers are tightening their belt in their buying decisions.

"We're seeing some trading down within the protein complex," adds Tonsor. "Think about going from a bacon product to a ham product, or from a ribeye steaks to a sirloin steak. There's a lot of examples like that. But the meat demand monitor project at K-State gives us a lot of points on that. And the short answer is yes."

There's also a debate on what's fueling inflation, a factor in the recession debate. The supply chain issues are one, but some also think excessive government spending is fueling the higher prices consumer are seeing. 

While the debate on why inflation is so high will continue, Lonnie Hobbs, Jr., a  PhD candidate in Ag Economics at Kansas State University says it's not just one thing aiding the higher costs.

"In terms of the supply chain, we're seeing these rise in prices because of a variety of factors such as rising transportation costs, rising cost of ingredients, rising costs of the processing that goes along with a lot of these products," says Hobbs. "We are seeing rising prices in all areas that can at times be good for the farmer [prices they receive], but in terms of consumers, it may alter some of their purchasing decisions."

The transportation issues aren't going away either. Low river levels and a looming rail strike in mid-November are two transportation issues that could fuel higher transportation costs. So, will the supply chain transportation issues go away anytime soon?

"In the short term? I will say no, I would see this going on into the next year," says Hobbs. "I think over time, things will get better, especially as the labor force begins to pick up. But I do think that this is something that farmers should be aware of moving into the new year."