WASHINGTON — For the past month or so, Republicans have insisted that the U.S. economy is in a recession, a period of reduced economic activity that could wreak political havoc on the ruling party.
Then, on Friday, the U.S. Labor Department announced that the economy added 500,000 jobs last month, bringing the national unemployment rate down to 3.5% — an almost all-time low, in a strong sign that the economy is not in a recession. In fact, in a recession.
Still, Republicans insisted that a recession is happening at a news conference on Friday, where they attacked Democrats’ plans to pass a major domestic policy bill.
“We’re in a recession, and this [bill] would make it worse,” Sen. Lindsey Graham (R-S.C.) said.
The Huffington Post asked five Republican senators at a news conference about how July’s job gains might play out in a recession. Sen. Bill Cassidy (R-La.) noted that the first and second quarters of this year saw negative growth in the U.S. gross domestic product (GDP), an important economic indicator.
“A recession is defined as two consecutive quarters of negative GDP growth,” Cassidy said.
Cassidy has a point: If you Google the definition of the word “recession,” Top Dictionary Results Call it “a period of temporary recession, during which trade and industrial activity declines, typically manifested by two consecutive quarters of declining GDP”.
But economists don’t use simple rules of thumb to tell when an economy is in recession—they follow the decision of the National Bureau of Economic Research, a private nonprofit that’s been around since the 1960s.
The NBER describes the recession as a “significant drop in economic activity” that spreads across industries. Quarterly GDP is a factor, but the most important measures are personal income and wage employment. These metrics all show growth.
in a The Frequently Asked Questions page on its website, the NBER explicitly rejected the definition of two quarters, saying that “two consecutive quarters of relatively small declines in GDP are possible without certainty” that economic activity has peaked and begun to decline.This GDP reading There has been a slight decline this year for some technical reasons, such as lower private inventory investment by businesses.
One of the tricky things about the recession debate is that the decision on a recession comes months after the government revises various monthly reports on employment, income, consumer spending and manufacturing. So even after the recession begins, it will only be officially announced later.
Now, just because job growth is strong doesn’t mean people should be comfortable with the economy. Consumer prices have been rising at their fastest pace in decades, including 9.1% in June. Consumers have been particularly hard hit by volatile food and natural gas prices, and consumer confidence has been very low as measured by the survey. The poll also showed that voters believe the economy is in a recession, and Republicans want those voters on their side.
“I’m glad we have strong job growth, but we’re in a recession,” Cassidy said.
Meanwhile, some voters who have told pollsters they think the economy is in a recession are likely to say so because they’ve heard it so many times from Republicans on TV. With a bad economy likely to benefit Republicans in November’s election, they are motivated to paint the dire picture possible and not motivated to present a finer, more realistic picture.
It’s odd that Republicans are exaggerating the economic problem when the public already dislikes what’s going on. And with the Fed raising interest rates to lower inflation, the real risk of a recession is looming.
Sen. Roger Marshall (R-Kan.) offered his own recession indicator: “For me, a recession is when I get home and the community banker says, ‘Hey, doctor, what’s going on? Business? Slowing down. Why are people afraid to invest?
Sen. John Barrasso (R-Wyo.) noted that labor force participation remains below pre-pandemic levels. “If you talk to your family, it’s getting harder and harder for them to keep up,” he said.
Graham believes questioning his economic analysis amounts to media bias against Republicans. “If the Republicans were in power, you wouldn’t be asking that question,” he said.
Graham, in particular, should know that economic data is not clearly pointing to a recession.In response to a query from South Carolina Republicans this week, the head of the Congressional Budget Office — an economist named Philip Swagel — told him it was It’s too early to say there’s a recession.
“In retrospect, it may become apparent that the economy is entering a recession at some point this year,” Swagger wrote. “However, from the data available in early August, that was unclear.”