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- [Narrator] If you look at every U.S. recession, well, since World War II, you'll see two things always happen. The GDP, the measure of economic output goes down and unemployment goes up. - For most Americans, when do you feel a recession? It's when you start worrying about your job. - [Narrator] Now let's look at today. The GDP is going down, even the head of the federal reserve says a recession is- - Certainly a possibility. - [Narrator] But the unemployment rate, it's actually falling. More people are getting jobs, not losing them. - We don't know if it's a recession. What we can say is that if it is one, it's not like anything we've ever seen before. - [Narrator] Here's why. The reason the GDP and unemployment are always together is because they feed on each other. When businesses layoff workers, people spend less money which means businesses make fewer profits and lay off workers. A recession can begin at any of these points. And in 2022, people could cut back on spending. Just look at consumer sentiment, a measure that weighs how people are feeling about the economy and whether they plan to spend money soon. Generally, when people respond that they feel more pessimistic, a recession follows. And right now they're feeling about as good as during the great recession in 2008, thanks to inflation, not a great sign for the GDP. - If people are frustrated by high inflation, if they think inflation is gonna stick around for a while, they might pull back convince companies to cut back and that leads to worse outcomes for the economy. - [Narrator] But businesses are in a different place than past recessions. This chart shows the average corporate profit margin. In the past profits were in these single digits leading into several recessions including 2001. - That was a business driven recession where companies over-invested, they decided they had to cut back in order to rebuild our profit margins and that led us right into a recession. - The bubble has now burst. I would not argue yet that we've seen the bottom in NASDAQ or in our tech index. - So are we back in one of those cycles? In some ways it doesn't look like that because profit margins are so high right now. - [Narrator] Not only are corporate profits in double digits but the amount of cash they have is close to $4 trillion. Analysts say that's a significant downturn buffer. - They might just decide they can weather this storm and not lay off workers and not cut back on investment and kind of get us to the other end of this adjustment without a big retrenchment that feeds on itself. - [Narrator] And companies have an incentive to not lose any workers because many are having problems finding workers in the first place. It's a really unique time in the job market. The labor force participation rate is as...