There’s a lot of debate throughout the U.S. about whether the country is in a recession. Last week, a report showed the GDP dropped another nine-tenths of a percentage point in the second quarter of this year. It’s the second straight quarter showing a drop in GDP, and many economists say it’s a sign of a possible recession. The Federal Reserve also hiked the interest rate another 75 basis points.
Jared Bernstein of the White House Council of Economic Advisers says the U.S. economy is going through a “transition”.
“There’s no question that the economy is transitioning from the break-neck growth pace of 2021 when we more than replaced all the private sector jobs that were lost in the pandemic-induced recession. That was back before we got here. I think the President’s plan when he arrived back in 2021, to get shots in arms and checks in pockets, really set up that very strong growth rate that gave us the labor market backdrop that we’re still enjoying today. But, at the same time, we know that households are facing unexpectedly high inflation.”
The administration is happy to see gas prices lowering recently, but he also says there’s more to do yet.
“We’re glad to see prices that pump down a bit, about 74 cents or so, nationwide, but that’s not enough. More needs to be done. And that’s why we’re also glad to see the legislative agenda that’s evolved over the past few days, including this Inflation Reduction Act that Democrats hope to pass through reconciliation. So, there are a lot of moving parts, but I think when you get right down to how our households experiencing this economy, put aside and do it quickly, in my view, all of the technical definitions of this versus that variable and ask the question, how are the American households doing?”
While inflation is still too high, Bernstein says there is some good economic news out there.
“The answer is that they face unacceptably high inflation and it’s a real stressor for them. We’re doing everything we can to help, but the answer is also that they are living amidst one of the strongest job markets in our history, and that’s a buffer that we shouldn’t leave out of the conversation.”
So, is the U.S. in a recession? Bernstein; “If you look at the factors that determine a recession, I think the answer is unlikely. Now, we don’t know this because the people who make this decision, they’re called the National Bureau of Economic Research in Cambridge, Massachusetts, they look at consumer spending. That’s up a percent. So, this report, as you correctly identifies for the second quarter of the year, GDP was down nine-tenths. But consumer spending was up a percent. That’s one of the key variables they look at. The other key variable they look at is payroll job growth. That’s also up.”