Data May Show US Economy Shrank for Second Straight Quarter

With the possibility of a Thursday (July 28) report showing the U.S. economy shrank for the second straight quarter, the Biden administration is getting in front of the narrative that the nation is in recession.

The gross domestic product (GDP) fell in the first quarter of 2022 by 1.6% annualized, and though the second quarter GDP is projected to rise 0.4%, some analysts think it may fall again — and two consecutive quarters of falling GDP is a common definition of recession.

But the Biden administration says it would be a “technical recession,” not a real one, Bloomberg reported Tuesday (July 26). They say the real definition of a recession is more complicated.

A recession, as the Biden administration is pointing out, is defined by the National Bureau of Economic Research (NBER) as a “significant decline in economic activity that is spread across the economy and that lasts for more than a few months.” The Biden administration contends that’s not what’s currently happening.

Administration officials have been touting the strong labor market, which created over a million jobs in the second quarter. As Treasury Secretary Janet Yellen told NBC’s “Meet the Press,” “When you’re creating almost 400,000 jobs a month, that is not a recession.”

National Economic Council Director Brian Deese made the same point in an interview Monday.

And Biden himself has said his hope is that the economy will go from “rapid growth to steady growth.” He also noted the unemployment rate is historic low at 3.6%.

They’re likely trying to get ahead of a political messaging battle with Republicans ahead of midterms later this year, Bloomberg wrote.

Meanwhile, PYMNTS recently wrote that consumer confidence, roiled by inflation, has recorded three months of declining numbers. The Consumer Confidence Index for July was at 95.7, the lowest since February 2021.

See also: Inflation Puts Dent in US Consumer Confidence

This could mean more instances of people saving money and not spending as much on nonessential purchases. McDonald’s and other companies have said they’ve seen some evidence of this happening already.

And more people have been saying they feel jobs are less plentiful in general.

Lynn Franco, the confidence board’s senior director of economic indicators, said the next few months could see more challenges for spending and economic growth.