U.S. President Joe Biden and members of his administration are avoiding the “R word” — recession — to describe the country’s economy despite the release of government data showing a contraction for a second straight quarter, a traditional benchmark for a recession.
“There’s going to be a lot of chatter today on Wall Street and among pundits about whether we are in a recession,” Biden told a group of business leaders gathered at the White House on Thursday afternoon. “But if you look at our job market, consumer spending [and] business investment, we see signs of economic progress in the second quarter, as well.”
Treasury Secretary Janet Yellen, earlier speaking to reporters next door at the Department of the Treasury, said “most economists and most Americans have a similar definition of recession — substantial job losses and mass layoffs, businesses shutting down, private sector activity slowing considerably, family budgets under immense strain. In sum, a broad-based weakening of our economy. That is not what we’re seeing right now.”
Yellen, responding to a reporter, also said, “We should avoid a semantic battle” over whether the economy is in recession.
The recession rhetoric, however, was amplified on Thursday after the Commerce Department’s Bureau of Economic Analysis reported gross domestic product of the United States — the broad measure of goods and services produced in the country — shrank at a seasonally adjusted annual rate of 0.9% in the April through June period. That follows a 1.6% decline in this year’s first quarter.
“Popularly, we are in a recession because most people think that a recession involves two consecutive quarters of negative economic growth. And we’ve got that,” Desmond Lachman, an economist at the American Enterprise Institute, told VOA.
Consumer sentiment “now is close to record low levels. They’re struggling with high inflation. The wages are getting eroded. They’ve lost a lot of money on the stock exchange. So, consumers don’t feel good about the economy,” Lachman added.
Recessions in the United States are officially declared by the National Bureau of Economic Research (NBER), but such determinations are made in retrospect. Its definition of a recession is based on a significant decline in economic activity over numerous months, taking into consideration such factors as employment, output, retail sales and household income.
“[The NBER] only make that judgment something like six months or a year after the numbers look like they’re indicating the recession,” said Lachman. “So, in short, it’s too early to say that we’re officially in a recession.”
Yellen agreed, telling reporters, “They’ll decide it sometime in the future.”
In the meantime, economists outside the government and elected officials are free to spin the numbers to make their own declarations.
“The Biden White House can play word games and try and contort the English language as it sees fit in order to advance its radical and harmful agenda,” said Steve Moore, an economist with FreedomWorks, a conservative advocacy group. “What this administration cannot change is the fact that American consumer confidence continues to fall under Biden’s watch. Americans are overwhelmingly pessimistic about the state of the Biden economy, and no wordplay over the definition of ‘recession’ can change that.”
Numerous Republican members of Congress tweeted immediately after the data was released to declare the country is now in a recession.
“Democrats threw us into recession,” said Senator Ted Cruz, a member of the Senate’s Joint Economic Committee.
“Biden and his army of woke journalists can obscure this all they want, but they cannot escape this fact: America is in a recession,” declared Representative Carlos Gimenez, a member of the House Transportation and Infrastructure Committee. “Hardworking American families deserve so much better than what this administration has put us through in the last year.”
“The U.S. is officially in a recession, thanks to the Democrats’ reckless spending. Americans are suffering because of Joe Biden’s America-last policies,” said Representative Jeff Duncan, a member of the House Energy and Commerce Committee.
Inflation in the country hit a 40-year high of 9.1% last month. The country’s central bank, the Federal Reserve, hiked interest rates on Wednesday by three-quarters of a percent, its latest such increase to try to tame price hikes, but a move some economists warn could trigger a recession.
“The problem with the Federal Reserve is they do too little, too late,” according to Lachman. “By the time that they started raising interest rates at the beginning of this year, the inflation genie was well out of the bottle — we had multi-decade highs in the inflation rate. The same thing is now occurring this time around that the Fed keeps raising interest rates, even though there are rather clear signs that the economy is slowing.”
Lachman, a former official at the International Monetary Fund, added that the actions by the Federal Reserve have put a lot of developing economies under pressure as capital that had flowed to those countries has returned to the United States, and a stronger dollar is making it difficult for them to fund their balance of payment deficits.
“Once the United States economy slows, it means that the export markets for the emerging market countries isn’t as robust as it was before. So, we could see difficulty for the emerging market, certainly the remainder of this year. But there might be relief next year, once the Fed stops this interest rate hiking cycle and begins cutting interest rates,” predicted Lachman.
Yellen told reporters she is also worried about the global outlook.
Rising interest rates and a strong U.S. dollar “can create pressures in other parts of the world, especially at a time when all of us are suffering from the impacts of Putin’s war that are driving up energy and food prices and creating real burdens on most countries around the world, and particularly the lowest income countries,” she said.