Joe Biden’s Treasury Secretary Janet Yellen went into full denial mode this week after the country’s gross domestic product (GDP) reporting the second quarter of 2022 established the second consecutive quarter of negative growth for the economy. That measure has been the definition used by economists to mark a national recession since at least World War II.
Yellen claims that there are positive factors building the economy that are more important than the negative growth experienced throughout 2022. She therefore refused to acknowledge that the economy is now in recession.
She said that when looking at the economy currently, recession is “not what we’re seeing.” She cited job creation, strong household finances, and consumer spending as support for her argument.
Some of the apologists for the Biden administration are also pointing to the second quarter’s negative GDP of -0.9% as an improvement on the first quarter figure of -1.6%.
Almost all have come out with the corporate media talking point that two consecutive quarters of shrinking GDP is no longer a valid technical definition of “recession.” That is despite the fact that “recession” is and has always been a technical term of art in economics that relies on the previously established definition.
In any event, Yellen is maintaining the administration signaling that things are going well, despite the real-life experience of ordinary Americans. She said this week that “our economy remains resilient.”
She hesitantly agreed that inflation is “unacceptably high” and could be affecting household budgets. She said that she considers inflation more damaging than the labor market.
The National Bureau of Economic Research (NBER) might provide some support for Yellen, as it provides a somewhat vague definition of recession. It says that a recession occurs when there is a “significant decline in economic activity that is spread across the economy and lasts more than a few months.”
It is difficult to make a convincing argument that two straight quarters of contraction does not amount to a “few months,” however that is defined.
Yellen went on to say that the current economy is in a “very unusual situation.” She said that although there is a “slowdown,” if not a recession, the “labor market remains very tight.”
The unemployment rate nationwide for June stood at 3.6%. The “strong labor market” talking point hits a snag, however, when considered in light of the U.S. labor-force participation rate.
The U.S. is experiencing a growing population and a shrinking number of workers counted as part of the labor force. That makes it very difficult for many businesses to fill open positions. Even though that should cause wages to rise in step with inflation, that isn’t happening.
Americans suffering from paychecks that are rapidly shrinking in real terms against price inflation likely have a different opinion on the strength of the economy than the officials in the Biden administration who are supposedly running it.