Tips for Weathering a Recession

N E W  Y O R K, Sept. 5 -- It might not officially be a recession, but so far this year, a million Americans have lost their jobs, and the economy grew by a skimpy 1 percent last quarter.

Analysts are predicting corporate profits will drop more than 8 percent — $30 billion — for the year. And a new ABCNEWS/Washington Post poll found that 52 percent of Americans think the economy is heading into a recession — 7 percent more than thought so in April.

Good Morning America contributor Mellody Hobson, president of Ariel Capital Management in Chicago, explained how to recession-proof yourself, and even take advantage of the economic downturn.

Is it a Pseudo-Recession?

First off, Hobson calls this a "pseudo-recession," because by government standards we aren't in a recession at all. A recession is two consecutive quarters of decline in gross domestic product (GDP), the total value of goods and services that a nation produces.

The U.S. Commerce Department reports that the nation's GDP grew in the second quarter at its weakest rate in eight years. But as long as the economy shows positive growth, no matter how small, the economy is not in a recession.

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"But with job cuts at 1 million and the S&P 500 down, it feels like one," Hobson said. Even President Bush is out and about, trying to boost the spirits of American workers.

Despite the fact that the Fed has cut interest rates seven times since January, the latest crop of economic statistics looks bleak. U.S. households owe 97 percent of their disposable income, the greatest percentage of debt in post-war U.S. history.

"Literally the consumer has been holding up the economy with their credit-card spending," Hobson said. Consumer spending has held strong, housing prices have held up, and government spending has been brisk. But all three are showing signs of weakening.

Go Bargain Shopping for Stocks

Going bargain-shopping for stocks is one smart move you can make in this pseudo-recession. It's a stock-picker's market, Hobson says.