Is America in recession? Question debated

It is generally agreed upon that a recession is defined as a period of two consecutive quarters in which the gross domestic product (GDP) falls.

On the other hand, Joe Biden remarked that the current situation “does not look like a recession, in my opinion.”

A few months before a crucial election for Joe Biden, the United States’ gross domestic product (GDP) had another contraction in the second quarter, which increased the likelihood of the world’s largest economy entering a recession. This occurred just a few months before the election.

According to numbers that were released by the Commerce Department on Thursday, the annualized rate of contraction in GDP is 0.9%. This is a measure that is preferred by the United States, which compares the current quarter to the previous quarter and then forecasts the development over the entire year.

A decline of 1.6% was already recorded in the first quarter, and it was anticipated that growth would be weak.

It is generally agreed upon that a recession is defined as a period of two consecutive quarters in which the gross domestic product (GDP) falls. On the other hand, Joe Biden remarked that the current situation “does not look like a recession, in my opinion.”

His Minister of Finance, Janet Yellen, additionally asserted that the economy of the United States continued to be “resilient,” despite the fact that it was “slowing down.”

In June, the annual rate of inflation reached a new high of 9.1%, setting a new record. In addition, a reduction in economic activity is necessary in order to slow it down.

The minister, on the other hand, indicated that it is “possible to slow inflation and maintain a solid labor market.”

According to the statements made by the Secretary of the Treasury during a press conference, “the majority of economists and the majority of Americans have a similar definition of a recession: significant job losses and massive layoffs.”

“This is not what we are currently observing,” she emphasized, drawing attention to the in excess of one million new jobs that have been generated over the course of the past three months. She would rather refer to the economy as “an economy in transition towards growth.” stable and long-lasting in nature.

The opposition, on the other hand, is extremely critical of “Joe Biden’s recession.” On Twitter, the Republican Party made the observation that the economy has been in a downward spiral for the past two quarters in a row.

“The government has just announced what every American has been feeling for almost a year, we are in a recession,” Kevin McCarthy, the head of Republican elected officials in the House of Representatives, bemoaned. “We are in a recession.”

In addition to this, he asserts the Democrats “would rather redefine recession than restore a healthy economy.”

It was stated by the Commerce Department that the decrease in GDP during the second quarter was a reflection of the decrease in business investment as well as the decrease in housing purchases made by families. In addition, spending has been reduced by governments on both the federal and municipal levels.

Despite the fact that expenditure on services, and particularly rentals, which have seen their costs skyrocket as a result of inflation, consumption, which is the engine that drives growth in the United States, has remained stable. There has been a decline in the amount of commodities.

If we merely compare the current quarter’s GDP to the previous quarter, we find that it has decreased by 0.2% over the course of the quarter, as do most advanced economies.

Is it true that the United States of America has entered a recession or not? Despite the fact that the debate had already been going on for a few days, it appears that it has begun once more with a vengeance.

In her statement, Yellen stated, “We should avoid a semantic battle.” In some cases, individuals will use the term “recession” to refer to the situation of extremely high inflation.

In a note, Lydia Boussour and Kathy Bostjancic, both of whom are economists working for Oxford Economics, emphasize that they are skeptical that the economy is currently experiencing a recession due to the robustness of the labor market.

The rate of unemployment, which is currently at 3.6%, is extremely close to its level before the pandemic, which was the lowest in fifty years, and firms are still having a difficult time recruiting new employees.

On the other hand, the economist Mohamed El-Erian, who is also the president of Queens’ College of the University of Cambridge and the economic advisor to the insurance company Allianz, warns on Twitter that the decline in GDP “reinforces stagflation” (stagnation of activity and inflation, editor’s note) and “triggers the red alert for recession.”

The National Bureau of Economic Research (NBER) is the only independent body in the United States that is authorized to make formal determinations regarding the duration of recessionary periods. However, his pronouncements are made after a period of several months.

In addition to observing “the extent of the decline in activity,” the National Bureau of Economic Research (NBER) describes on its website that they “consider a series of indicators.”

For its part, the International Monetary Fund (IMF) has dropped its growth prediction for the United States in 2022 by a significant amount, and it now anticipates only 2.3% growth (whereas in April, it still anticipated 3.7% growth).

As a result of the Covid-19 crisis, the Gross Domestic Product of the United States saw a decline of 3.4% in the year 2020, although it experienced a rebound of 5.7% in the year 2021.

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