Early Thursday morning, the Commerce Department released a quarterly report on Gross Domestic Product (GDP). In the three-month period between April and July 1, the economy shrank by 0.9 percent. At the end of March, the economy had shrunk by 1.6 percent. Technically, this meets the definition of a recession, although the White House has been loathe to acknowledge such.
Last weekend, the White House website posted a blog that discussed the textbook definition of recession. Critics pounced on the idea, and many predicted that the Biden Administration already knew that the Commerce Department’s numbers weren’t great, so they were starting a Pravda-esqe campaign to head off the upcoming report. Many major media outlets even began reporting that the accepted definition of “recession” isn’t the true definition.
Politico even commented that the Thursday Commerce Department report could be “possibly inaccurate.” On Wednesday, Fed head Jerome Powell said “he does not see a recession” but that he did see “contracting and growth” in the economy. Powell also noted that the initial GDP reports traditionally need to be revised every quarter.
Some Americans believe that the Biden Administration and the media are trying to talk citizens out of a recession. Seema Shah, Principal Global Investors’ chief global strategist, told Fox News: “Policymakers will no doubt be tying themselves in knots trying to explain why the U.S. economy is not in recession. However, they make a strong point. While two consecutive quarters of negative growth is technically a recession, other timelier economic data are not consistent with recession.”
Shah is referring to the 3.6 percent unemployment rate and a strong labor market. Other White House economic officials are also pointing to these positive areas of the economy. At the same time, many companies – particularly in big tech – are either laying off employees or have announced hiring freezes.
The National Bureau of Economic Research noted that not only is a recession defined by the two consecutive terms of negative growth, but high unemployment and falling income or slowing retail sales usually accompany that negative growth.
Walmart reported earlier this week that it was lowering its profit forecast for 2022, citing spiking inflation that is affecting the way consumers shop. Some economists have noted that because Walmart is one retailer where most Americans shop, the slowed spending at Walmart is more indicative of the way the economy is affecting citizens. As a result, Walmart stock plunged.
Gross Domestic Product is the “broadest measure of goods and services provided across the economy.” The Commerce Department releases a quarterly report on GDP, and, by the technical definition, America is now in the midst of a recession. If tradition holds, the National Bureau of Economic Research – who has traditionally waited at least one year to declare an economic recession – may not make the recession official for some time.
The National Bureau of Economic Research noted that during the first two quarters of 2022, economic spending has been strong while the unemployment rate has remained steady. However, by the end of the year, spending and labor may not be as strong as it is thought to be now.
The Commerce Department noted that there are a number of causes for the negative GDP report. First, private inventories have declined, property investment at both the residential and nonresidential level, and government spending at all levels of government have influenced the -0.9 GDP numbers. At the same time, net exports offset the decreases.
Consumer spending is also two-thirds of the GDP number. Between April and July, consumer spending was still strong, even though retailers such as Walmart say their profits look to slip.
The GDP report has already added extra pressure to the Biden Administration at a time when the president is seeing very low polling numbers. Many in his own party are either refusing to support a 2024 run for Biden, and a recent poll showed that 64 percent of Democrats did not want to see Biden run for a second term.
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