What Is a Rolling Recession, and Are We in One? Here’s What Dave Ramsey Thinks

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Could these economic conditions be affecting you? 

A recession can affect many aspects of your financial life. It’s a period of economic downturn, usually defined by a situation where the gross domestic product of the country declines for two quarters in a row.

A rolling recession, on the other hand, is a little bit different than a traditional recession. Finance expert Dave Ramsey has defined the term and provided some insight into whether the U.S. may be experiencing a rolling recession right now.

What’s a rolling recession?

If you’re not familiar with the term, Ramsey has a simple and straightforward explanation about what “rolling recession” means.

“It happens when parts of the economy take a downturn—but others stay positive,” Ramsey explained. “A rolling recession hits different parts of the economy at different times. Instead of the whole economy tanking at once (like it would during a normal recession), some parts of the economy skid (to) a halt while others keep trucking along.”

Ramsey explained that people may stop spending money on certain goods and services when the economy looks shaky, which would hurt those industries. But, other industries may be performing well at the time, which can help offset the weakness in other sectors and make it so the economy as a whole doesn’t look that bad.

Ramsey gave an example of a situation where gas prices are up, which could increase profits for oil companies and gas stations. This has happened in recent months in the U.S. But if people are cutting back on other purchases, like new appliances, the manufacturing sector could see reduced profits even as the oil companies do better than ever. Ramsey said this has also happened as people stopped buying discretionary items due to high levels of inflation making necessities more expensive.

Since Ramsey gave several real-world examples that could suggest we’re in a rolling recession, it’s clear there’s reason to believe that this might be happening in the economy now. Ramsey also pointed out that some experts believe this is what’s going on. “Some economists think we’re currently experiencing a rolling recession, while others believe downward trends in some industries are just a sign that a full-on recession is headed our way.”

How you can prepare for a recession (rolling or otherwise)

For practical purposes, whether we are in a rolling recession right now or are about to enter a full-blown recession may not matter much. The fact is, there are worrying signs in the economy, and you could end up feeling the impact of them. You’ll want to be prepared if things go south.

The best way to do that is to make sure you have money in an emergency savings account. This should be money that is easily accessible whenever you need it. You should ideally have enough cash to cover three to six months of living expenses, although if that is hard to do, saving as much as you can is still important.

An emergency fund will protect you against devastating loss if a rolling recession (or full-blown recession) disrupts your work. You can use the emergency fund to cover the basics and then rebuild it during a period of recovery that inevitably follows recessions of all types, rolling or otherwise.

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