As economic data indicate that the United States is heading for a recession, the White House published a blog post last week that appeared to dismiss the rule-of-thumb recession definition.
The National Bureau of Economic Research, a nonprofit entity generally recognized as the country’s business cycle scorekeeper, defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” Though the group examines economy-wide data such as employment, real personal income, and personal consumption expenditures to help determine the length of business cycles, the marketplace has developed a rule-of-thumb definition that captures the severity and breadth of recessions — two consecutive quarters of negative gross domestic product (GDP) growth.
The United States is poised to meet that definition since the annualized economic growth rate shrank by 1.5% in the first quarter of this year and appears to have contracted at a 1.6% pace in the second quarter. As the U.S. Bureau of Economic Analysis prepares to publish an advance estimate of second quarter growth later this week, the Biden administration is already doing damage control.
“While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle,” the White House said in a Thursday blog post. “Instead, both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data — including the labor market, consumer and business spending, industrial production, and incomes. Based on these data, it is unlikely that the decline in GDP in the first quarter of this year — even if followed by another GDP decline in the second quarter — indicates a recession.”
As President Joe Biden’s approval rating continues to plummet, news of a recession would by no means improve Democrats’ odds in the upcoming midterm elections — especially as the White House has repeatedly insisted that the nation is “stronger economically than we have been in history.” CNBC’s All-America Economic Survey, for example, recently showed a meager 30% of Americans approving of Biden’s economic performance, while Republicans are positioned to gain up to 70 seats in the House of Representatives.
“The Biden administration is trying to move the recession goalposts from the traditional definition of two consecutive quarters of negative economic growth to pretend the economy is not in a recession,” Job Creators Network CEO Alfredo Ortiz said in a statement provided to The Daily Wire. “This is a desperate attempt to prevent Biden from being labeled a recession President, which would further hurt Democrats’ chances in the midterm elections this fall.”
The White House noted that various data series considered by the National Bureau of Economic Research — including nonfarm payrolls, real personal consumption expenditures, industrial production, and real income minus government payments — have flatlined rather than declined since COVID and the lockdown-induced recession. Yet other economic data — including real earnings and consumer sentiment — depict an economy deeply impacted by record inflation and pervasive supply constraints.
“Historic inflation, a declining labor force, cratering financial markets, and record-low consumer confidence only bolster recession indications,” Ortiz added. “No matter how the administration tries to slice it, the economy is in recession. And the Biden administration only has itself to blame.”
Over the weekend, Treasury Secretary Janet Yellen likewise acknowledged to NBC host Chuck Todd that “there has usually been a recession” amid two consecutive quarters of negative growth, yet argued that “we are not in a recession now.”
“I understand that, but you’re splitting hairs,” Todd challenged. “If the technical definition is two quarters of contraction, you’re saying that’s not a recession?”
“That’s not the technical definition,” Yellen retorted. “Most of the data that they look at right now continues to be strong. I would be amazed if the NBER would declare this period to be a recession, even if it happens to have two quarters of negative growth.”
Source: Dailywire
