As President Joe Biden’s administration prepares for sobering GDP figures to be released on Thursday, the White House is reiterating its position that two quarters of economic downturn do not constitute a recession.
Brian Deese, director of the National Economic Council, spent the majority of the White House press conference on Tuesday arguing that even while the economy is slowing, it is not in a recession.
‘Transitioning from a historically robust recovery into a time of more stable and consistent growth,’ he claimed, was the administration’s aim.
He asserted that the United States is “in that era of transition right now” and that it is “in a stronger position than practically any other country in the world.”
Defining a “technical recession” as two consecutive quarters of economic downturn, the government has found it difficult to argue that the economy is not in one.
The quarterly gross domestic product numbers released on Thursday may reveal a second consecutive quarter of economic contraction.
GDP for the first quarter of 2022 decreased at an annual rate of 1.5 percent, which was worse than anticipated.
The Biden campaign emphasises the nation’s rapid job growth, which is normally an indication of a healthy economy.
The Fed is anticipated to increase interest rates once more on Wednesday, which will make it more expensive to obtain a vehicle or home loan.
On the other end of the economic spectrum, however, consumers are currently experiencing the highest inflation in 40 years.
Deese claimed that despite inflation, the United States is still doing better than nations going through a “famine.”
‘Obviously, the high prices are hurting Americans very badly, but they’re hurting those regions who are experiencing famine in a different way,’ he said.
Deese continued, saying, “Two quarters of negative GDP growth is not the precise definition of recession. Historically, economists have not based their work on this definition.
He cited the National Bureau of Economic Research, a non-profit organisation that determines whether the country is experiencing a recession or not.
Recessions are characterised by “a severe fall in economic activity that is spread across the economy and lasts more than a few months,” according to the association.
Biden has been working over the past several days to prepare for the string of poor economic indicators anticipated this week, including the Fed’s announcement on interest rates on Wednesday, the GDP report on Thursday, and consumer confidence data on Friday.
On Monday, Biden stated that a recession is not occurring in the nation.
During a virtual conference at the White House, he assured reporters that “we are not entering recession.”
“The unemployment rate is the highest in recorded history. We transition from this quick expansion to moderate growth, in my opinion.
As a result, some will be seen coming down. However, God willing, I don’t think we’re going to see a recession,’ he remarked.
However, based on information from the Federal Reserve, some experts claim that the nation is already experiencing a moderate recession.
White House officials, however, contend that a recession is defined based on ‘a comprehensive view at the facts – encompassing the labour market, consumer and business spending, industrial production, and earnings’ in a blog post that was published on Monday.
According to their analysis, “it is doubtful that the decrease in GDP in the first quarter of this year — even if followed by another GDP decline in the second quarter — signifies a recession.”
Because of his management of the post-pandemic economy, Biden is receiving heavy criticism in the polls.
Voters blame their discontent with inflation, which is at a 40-year high, for his job approval ratings falling into the 30s.
Democrats are concerned that these figures may translate into substantial losses this November when it comes to voting for control of Congress.
Goldman Sachs reduced its second-quarter GDP projection earlier this month from the previous forecast of a 1.9 percent gain to just 0.7 percent.
Furthermore, earlier this month, the Atlanta Federal Reserve updated its GDPNow tracker to reflect an anticipated fall of 1.9 percent in the second quarter.
Additionally, another significant increase in the Federal Reserve’s benchmark interest rate is predicted to be announced this week.
Normally, the Fed would lower interest rates or cease raising them during an economic downturn, but instead, the nation’s central bank is attempting to control the raging inflation that is pushing up the cost of food, petrol, and housing across the nation.
The Federal Reserve is anticipated to increase its benchmark rate by a second consecutive three-quarter point increment, bringing it to a range of 2.25 percent to 2.5 percent.
Since March, there have been four rate increases.
Such Fed actions raise the cost of taking out a mortgage, an auto loan, or a business loan.
In result, consumers and companies are likely to borrow less money and spend less, which will slow the economy.
The aggressive Fed actions, according to Wells Fargo experts, are expected to hasten the start of a “mild” recession that is expected to endure until mid-2023.
Inflation’s ability to persist, regardless of when it peaks, is more important in our opinion than whether it peaks this summer or in the fall.
The recession appears to be approaching faster in the U.S. and, a little later, in the eurozone, according to the firm’s report on the erosion.
Some experts contend that the US has already entered a mild recession, citing data from the Atlanta Federal Reserve and a decline in consumer expenditure that is probably related to inflation and an increase in new cancer cases.
Officials from the administration contend that the economy is more complex than the GDP indicates.
According to Deese, the American people care about having some economic breathing room, having more work prospects, and seeing an increase in their earnings.
And I believe that we should train our attention to be on that rather than on technical arguments about data that is being viewed in the past, he continued.
The administration also makes the case that an economic downturn often results in the creation of new jobs.
The labour market is currently very robust. Net job growth averaged 375,000 over the past three months alone. On NBC’s Meet the Press on Sunday, Treasury Secretary Janet Yellen stated, “This is not an economy that is in recession.”
She acknowledged that “the economy is slowing down,” nevertheless.
This economy is not in a recession, she emphasised, but rather is going through a time of change during which growth is sluggish.
Even though there have been two consecutive quarters of negative growth, I would be shocked if the NBER proclaimed this time to be a recession.
The job market in our country is really robust. It is not a recession when you are adding roughly 400,000 jobs a month, according to Yellen.