Is the U.S. Economy in a Recession?

In an early July poll, 58% of Americans said they thought the U.S. economy was in a recession, up from 53% in June and 48% in May. ¹ Yet many economic indicators, notably employment, remain strong. The current situation is unusual, and there is little consensus among economists as to whether a recession has begun or may be coming soon. ²

Considering the high level of public concern, it may be helpful for Kroger employees and retirees to look at how a recession is officially determined and some current indicators that suggest strength or weakness in the U.S. economy.

Business Cycle Dating
U.S. recessions and expansions are officially measured and declared by the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), a private nonpartisan organization that began dating business cycles in 1929. The committee, which was formed in 1978, includes eight economists who specialize in macroeconomic and business cycle research. ³

The NBER defines a recession as 'a significant decline in economic activity that is spread across the economy and lasts more than a few months.' The committee looks at the big picture and makes exceptions as appropriate. For example, the economic decline of March and April 2020 was so extreme that it was declared a recession even though it lasted only two months. ⁴

To determine peaks and troughs of economic activity, the committee studies a range of monthly economic data, with special emphasis on six indicators: personal income, consumer spending, wholesale-retail sales, industrial production, and two measures of employment. Because official data is typically reported with a delay of a month or two — and patterns may be clear only in hindsight — it generally takes some time before the committee can identify a peak or trough. Some short recessions (including the 2020 downturn) were over by the time they were officially announced. ⁵

Strong Employment
Over the last few months, economic data has been mixed. Consumer spending declined in May when adjusted for inflation, but bounced back in June. ⁶ Retail sales were strong in June, but manufacturing output dropped for a second month. ⁷ The strongest and most consistent data has been employment. The economy added 372,000 jobs in June, the third consecutive month of gains in that range. Total nonfarm employment is now just 0.3% below the pre-pandemic level, and private-sector employment is actually higher (offset by losses in government employment). ⁸

The unemployment rate has been 3.6% for four straight months, essentially the same as before the pandemic (3.5%), which was the lowest rate since 1969. ⁹ Initial unemployment claims ticked up slightly in mid-July but remained near historic lows. ¹⁰ In the 12 recessions since World War II, the unemployment rate has always risen, with a median increase of 3.5 percentage points. ¹¹

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Negative GDP Growth
One common definition of a recession is a decrease in real gross domestic product (GDP) for two consecutive quarters, and the current situation meets that criterion. Real (inflation-adjusted) GDP dropped at an annual rate of 1.6% in the first quarter of 2022 and by 0.9% in the second quarter. ¹² Because GDP is reported on a quarterly basis, the NBER committee cannot use it to measure monthly economic activity, but the committee does look at it for defining recessions more broadly.

Since 1948, the U.S. economy has never experienced two consecutive quarters of negative GDP growth without a recession being declared. However, the current situation could be an exception, due to the strong employment market and some anomalies in the GDP data. ¹³

Negative first-quarter GDP was largely due to a record U.S. trade deficit, as businesses and consumers bought more imported goods to satisfy demand. This was a sign of economic strength rather than weakness. Consumer spending and business investment — the two most important components of GDP — both increased for the quarter. ¹⁴

Initial second-quarter GDP data showed a strong positive trade balance but slower growth in consumer spending, with an increase in spending on services and a decrease in spending on goods. The biggest negative factors were a slowdown in residential construction and a substantial cutback in growth of business inventories. ¹⁵ Although inventory reductions can precede a recession, it's too early to tell whether they signal trouble or are simply a return to more appropriate levels. ¹⁶ Economists may not know whether the economy is contracting until there is additional monthly data.

The Inflation Factor
With employment at such high levels, it may be questionable to characterize the current economic situation as a recession. However, it's important for Kroger employees to keep in consideration that the employment market could change, and recessions can be driven by fear as well as by fundamental economic weakness.

The fear factor is inflation, which ran at an annual rate of 9.1% in June, the highest since 1981. ¹⁷ Wages have increased, but not enough to make up for the erosion of spending power, making many consumers more cautious despite the strong job market. ¹⁸ If consumer spending slows significantly, a recession is certainly possible, even if it is not already underway.

Inflation has forced the Federal Reserve to raise interest rates aggressively, with a 0.50% increase in the benchmark federal funds rate in May, followed by 0.75% increases in June and July. ¹⁹ It takes time for the effect of higher rates to filter through the economy, and it remains to be seen whether there will be a 'soft landing' or a more jarring stop that throws the economy into a recession.

No one has a crystal ball, and economists' projections range widely, from a remote chance of a recession to an imminent downturn with a moderate recession in 2023. ²⁰ If that turns out to be the case, or if a recession arrives sooner, it's important for Kroger employees and retirees to remember that recessions are generally short-lived, lasting an average of just 10 months since World War II. By contrast, economic expansions have lasted 64 months. ²¹ To put it simply: The good times typically last longer than the bad.

Projections are based on current conditions, are subject to change, and may not come to pass.

1) Investor's Business Daily, July 12, 2022
2) The Wall Street Journal, July 17, 2022
3–5) National Bureau of Economic Research, 2021
6, 12, 15, 21) U.S. Bureau of Economic Analysis, 2022
7) Reuters, July 15, 2022
8–9, 17–18) U.S. Bureau of Labor Statistics, 2022
10) The Wall Street Journal, July 14, 2022
11) The Wall Street Journal, July 4, 2022
13–14) MarketWatch, July 5, 2022
16) The Wall Street Journal, July 28, 2022
19) Federal Reserve, 2022
20) The New York Times, July 1, 2022

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How does the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN ensure that employees receive adequate retirement benefits calculated based on their years of service and compensation? Are there specific formulas or formulas that KROGER uses to ensure fair distribution of benefits among its participants, particularly in regards to early retirement adjustments?

The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN ensures that employees receive adequate retirement benefits based on a formula that takes into account both years of credited service and compensation. The plan, being a defined benefit plan, calculates benefits that are typically paid out monthly upon reaching the normal retirement age, but adjustments can be made for early retirement. This formula guarantees that employees who retire early will see reductions based on the plan’s terms, ensuring a fair distribution across participants(KROGER_2023-10-01_QDRO_…).

In what ways does the cash balance formula mentioned in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN impact the retirement planning of employees? How are these benefits expressed in more relatable terms similar to a defined contribution plan, and how might this affect an employee's perception of their retirement savings?

The cash balance formula in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN impacts retirement planning by expressing benefits in a manner similar to defined contribution plans. Instead of a traditional annuity calculation, the benefits are often framed as a hypothetical account balance or lump sum, which might make it easier for employees to relate their retirement savings to more familiar terms, thereby influencing how they perceive the growth and adequacy of their retirement savings(KROGER_2023-10-01_QDRO_…).

Can you explain the concept of "shared payment" and "separate interest" as they apply to the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN? How do these payment structures affect retirees and their alternate payees, and what considerations should participants keep in mind when navigating these options?

In the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN, "shared payment" refers to a payment structure where the alternate payee receives a portion of the participant’s benefit during the participant's lifetime. In contrast, "separate interest" means that the alternate payee receives a separate benefit, typically over their own lifetime. These structures impact how retirees and their alternate payees manage their retirement income, with shared payments being tied to the participant’s life and separate interests providing independent payments(KROGER_2023-10-01_QDRO_…).

What procedures does KROGER have in place for employees to access or review the applicable Summary Plan Description? How can understanding this document help employees make more informed decisions regarding their retirement benefits and entitlements under the KROGER plan?

KROGER provides procedures for employees to access the Summary Plan Description, typically through HR or digital platforms. Understanding this document is crucial as it outlines the plan’s specific terms, helping employees make more informed decisions about retirement benefits, including when to retire and how to maximize their benefits under the plan(KROGER_2023-10-01_QDRO_…).

With regard to early retirement options, what specific features of the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN can employees take advantage of? How does the plan's definition of "normal retirement age" influence an employee's decision to retire early, and what potential consequences might this have on their benefits?

The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN offers early retirement options that include adjustments for those retiring before the plan’s defined "normal retirement age." This early retirement can result in reduced benefits, so employees must carefully consider how retiring early will impact their overall retirement income. The definition of normal retirement age serves as a benchmark, influencing the timing of retirement decisions(KROGER_2023-10-01_QDRO_…).

How does the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN address potential changes in federal regulations or tax law that may impact retirement plans? In what ways does KROGER communicate these changes to employees, and how can participants stay informed about updates to their retirement benefits?

The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN incorporates changes in federal regulations or tax laws by updating the plan terms accordingly. KROGER communicates these changes to employees through official channels, such as newsletters or HR communications, ensuring participants are informed and can adjust their retirement planning in line with regulatory changes(KROGER_2023-10-01_QDRO_…).

What are some common misconceptions regarding participation in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN that employees might have? How can these misconceptions impact their retirement planning strategies, and what resources does KROGER provide to clarify these issues?

A common misconception regarding participation in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN is that it functions similarly to a defined contribution plan, which it does not. This can lead to confusion about benefit accrual and payouts. KROGER provides resources such as plan summaries and HR support to clarify these misunderstandings and help employees better strategize their retirement plans(KROGER_2023-10-01_QDRO_…).

How does the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN interact with other employer-sponsored retirement plans, specifically concerning offsetting benefits? What implications does this have for employees who may also be participating in defined contribution plans?

The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN interacts with other employer-sponsored retirement plans by offsetting benefits, particularly with defined contribution plans. This means that benefits from the defined benefit plan may be reduced if the employee is also receiving benefits from a defined contribution plan, impacting the total retirement income(KROGER_2023-10-01_QDRO_…).

What options are available to employees of KROGER regarding the distribution of their retirement benefits upon reaching retirement age? How can employees effectively plan their retirement income to ensure sustainability through their retirement years based on the features of the KROGER plan?

Upon reaching retirement age, KROGER employees have various options for distributing their retirement benefits, including lump sums or annuity payments. Employees should carefully plan their retirement income, considering the sustainability of their benefits through their retirement years. The plan’s features provide flexibility, allowing employees to choose the option that best fits their financial goals(KROGER_2023-10-01_QDRO_…).

How can employees contact KROGER for more information or assistance regarding the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN? What are the recommended channels for employees seeking guidance on their retirement benefits, and what type of support can they expect from KROGER's human resources team?

Employees seeking more information or assistance regarding the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN can contact the company through HR or dedicated plan administrators. The recommended channels include direct communication with HR or online resources. Employees can expect detailed support in understanding their benefits and planning for retirement(KROGER_2023-10-01_QDRO_…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Kroger offers both a defined benefit pension plan and a 401(k) retirement savings account plan. The defined benefit plan provides retirement income based on years of service and final average pay. The 401(k) plan allows employees to save for retirement with personal and employer contributions, including a company match. Employees can choose from various investment options within the 401(k) plan to grow their retirement savings.

Operational Changes: Kroger is undergoing a restructuring process that includes closing underperforming stores and cutting administrative costs. Layoffs: The company has announced layoffs affecting about 1,500 employees (Source: CNN). Financial Performance: Despite these changes, Kroger reported a 7% increase in same-store sales for Q2 2023, reflecting strong consumer demand (Source: Kroger).

Kroger offers RSUs that vest over time, providing shares to employees upon vesting. Stock options are also available, allowing employees to purchase shares at a set price, potentially benefiting from stock price increases.

Kroger has made significant updates to its employee healthcare benefits to align with the current economic, investment, tax, and political environment. In 2022, Kroger Health, the healthcare division of The Kroger Co., entered into a direct agreement with Prime Therapeutics to ensure continued access to affordable healthcare services for over 33 million Americans. This agreement, effective January 1, 2023, allowed Kroger's pharmacies to remain in-network for Prime's Medicare Part D members and other commercial, Medicare, and Medicaid customers. This initiative underscores Kroger's commitment to providing comprehensive healthcare services, including administering COVID-19 vaccines, offering in-store antibody tests, and distributing at-home COVID-19 tests, thereby enhancing health access and affordability. In 2023, Kroger was recognized for its commitment to workplace mental health, receiving the Gold Bell Seal for Workplace Mental Health from Mental Health America for the second consecutive year. This certification highlights Kroger's efforts to create a supportive and caring environment for its associates, focusing on mental, physical, and financial well-being. Kroger's wellness programs, mental health services, Employee Assistance Programs (EAP), and paid time off were rigorously evaluated, demonstrating the company's ongoing dedication to employee well-being. These efforts are part of Kroger's broader strategy to ensure a healthy and productive workforce, which is critical in navigating the current economic challenges and maintaining long-term business success.