The U.S. economy is plagued by inflation and suffering from fallout from Russia’s war in Ukraine – but it’s not in recession. That’s the message from White House officials.
Treasury Secretary Janet Yellen, economic adviser Brian Deese and Commerce Secretary Gina Raimondo have spoken out in recent days ahead of data on Thursday that may show that gross domestic product (GDP) shrank from April to June. The Federal Reserve Bank of Atlanta’s GDP forecast suggests a 1.6% decline. That would mark the second quarter of GDP decline in a row.
While a broad rule of thumb holds that two consecutive quarters of GDP drops signal a recession, the strong U.S. job market means this may be the rare moment when that is not enough for economists to declare the world’s largest economy in recession.
The White House pushback against recession talk is about more than semantics. Talking about recession can become a self-fulfilling prophecy as businesses and consumers, concerned that tougher times are ahead, cut back on spending and investment plans.
The economy is top of mind for many voters ahead of the Nov. 8 midterm elections that will decide whether President Joe Biden’s Democratic Party retains control of Congress.
“We’re not going to be in a recession,” Biden himself told reporters on Monday. “My hope is we go from this rapid growth to a steady growth.”
Even so, a GDP contraction would likely exacerbate fears that the United States is headed for or in the midst of an economic pullback and worry voters already struggling with higher grocery and gas bills.
White House officials believe the GDP weakness is due to one-off factors, including a decline in companies restocking inventories, that may not reflect broader trends.
“We’re seeing signs of slowing in the economy but slowing in a direction towards positive growth with lower inflation, consistent with the kind of transition that we’d like to see,” said one senior administration official.