New Update: Rising Oil Costs are Affecting Retirement Plans. Will you be impacted?
Is the U.S. Economy in a Recession?
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Energy market instability persists, with crude prices fluctuating between $50 and $120 per barrel and annualized volatility running around 80%. The effects reach well beyond the energy sector. Sustained crude volatility creates economic ripple effects that influence everything from Federal Reserve policy to corporate earnings guidance to consumer confidence. Lucent employees may find that their portfolio returns, benefit cost-sharing, and overall financial outlook are all shaped by an energy market they do not directly participate in. For Lucent employees focused on long-term financial health, periods of oil-driven economic volatility reinforce the value of diversified strategies that account for how energy markets influence the broader investment landscape. Working with a financial advisor can help you position your planning strategy for sustained energy price uncertainty.
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 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 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
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 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.
A Roth IRA conversion decision hinges on your full tax picture, including the employer benefits Lucent provides. For retirement planning purposes, Lucent maintains a defined benefit pension plan that has been frozen to new benefit accruals -- meaning the plan no longer accumulates future benefits for most employees, but those who were already vested may still be entitled to receive the pension benefit they accrued prior to the freeze, subject to the vesting requirements described in their plan documents, meaning the plan no longer accumulates future benefits for most employees, but those who were already vested may still be entitled to receive the pension benefit they accrued prior to the freeze, subject to the vesting requirements described in their plan documents. Lucent does not appear to offer a formal retiree healthcare program, making healthcare coverage planning an important consideration if you retire before age 65. Because the specifics of your pension benefit, retiree healthcare eligibility, and any matching contributions depend on your individual employment history and plan documents, We encourage you to review your Summary Plan Description (SPD) or speak with Lucent's HR or benefits team for the most current details.
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 Lucent 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 . 20 If that turns out to be the case, or if a recession arrives sooner, it's important for Lucent 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,
2) The Wall Street Journal, July 17,
3–5) National Bureau of Economic Research,
6, 12, 15, 21) U.S. Bureau of Economic Analysis,
7) Reuters, July 15,
8–9, 17–18) U.S. Bureau of Labor Statistics,
10) The Wall Street Journal, July 14,
11) The Wall Street Journal, July 4,
13–14) MarketWatch, July 5,
16) The Wall Street Journal, July 28,
19) Federal Reserve,
20) The New York Times, July 1,
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What is the primary purpose of Lucent's 401(k) Savings Plan?
The primary purpose of Lucent's 401(k) Savings Plan is to help employees save for retirement by allowing them to contribute a portion of their salary on a tax-deferred basis.
How can employees at Lucent enroll in the 401(k) Savings Plan?
Employees at Lucent can enroll in the 401(k) Savings Plan by completing the enrollment form available on the company’s benefits portal or by contacting the HR department for assistance.
Does Lucent offer a matching contribution for the 401(k) Savings Plan?
Yes, Lucent offers a matching contribution to the 401(k) Savings Plan, which helps employees increase their retirement savings.
What types of investment options are available in Lucent's 401(k) Savings Plan?
Lucent's 401(k) Savings Plan offers a variety of investment options, including mutual funds, target-date funds, and company stock.
Can employees at Lucent change their contribution percentage to the 401(k) Savings Plan?
Yes, employees at Lucent can change their contribution percentage at any time by accessing their account through the benefits portal.
What is the minimum age requirement for participating in Lucent's 401(k) Savings Plan?
The minimum age requirement for participating in Lucent's 401(k) Savings Plan is 21 years old.
Are there any fees associated with Lucent's 401(k) Savings Plan?
Yes, there may be administrative fees associated with Lucent's 401(k) Savings Plan, which are disclosed in the plan documents.
How often can Lucent employees change their investment allocations in the 401(k) Savings Plan?
Lucent employees can change their investment allocations in the 401(k) Savings Plan as often as they wish, subject to the specific terms outlined in the plan.
What happens to the 401(k) Savings Plan if an employee leaves Lucent?
If an employee leaves Lucent, they have several options for their 401(k) Savings Plan, including rolling it over to an IRA or a new employer's plan, or cashing it out (subject to taxes and penalties).
Is there a loan option available through Lucent's 401(k) Savings Plan?
Yes, Lucent's 401(k) Savings Plan may allow employees to take out loans against their account balance, subject to specific terms and conditions.
For more information you can reach the plan administrator for Lucent at 100 abbott park rd Abbott Park, IL 60064; or by calling them at 224-667-6100.
https://www.lucent.com/documents/pension-plan-2022.pdf - Page 5, https://www.lucent.com/documents/pension-plan-2023.pdf - Page 12, https://www.lucent.com/documents/pension-plan-2024.pdf - Page 15, https://www.lucent.com/documents/401k-plan-2022.pdf - Page 8, https://www.lucent.com/documents/401k-plan-2023.pdf - Page 22, https://www.lucent.com/documents/401k-plan-2024.pdf - Page 28, https://www.lucent.com/documents/rsu-plan-2022.pdf - Page 20, https://www.lucent.com/documents/rsu-plan-2023.pdf - Page 14, https://www.lucent.com/documents/rsu-plan-2024.pdf - Page 17, https://www.lucent.com/documents/healthcare-plan-2022.pdf - Page 23
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