Over the weekend the White House began to downplay talk of a recession ahead of some pretty bad numbers for the economy.
Despite a recession always being known as two consecutive quarters of negative GDP growth at the time, the White House is now claiming that that doesn’t technically mean that we are in a recession and used the excuse that “”Never in the history of our country have we had a recession where the economy was creating jobs, period, let alone creating 400,000 jobs,” Director of the National Economic Council Brian Deese told CNN’s John Berman on “New Day.”
Treasury Secretary Janet Yellen echoed the administration’s position and argued Sunday the economy is in “transition” and there is a “slowdown.” “This is not an economy that’s in recession, but we’re in a period of transition in which growth is slowing,” she told NBC’s “Meet the Press.” Yeah, inflation was only “transitory” according to Yellen so she’s not exactly credible on this.
There’s a few things wrong with these statements.
- Two consecutive quarters of negative GDP growth have always mean we are in a recession. There is of course more factors then that but at the time we look at GDP growth to determine if we are in a recession or not.
- This month the home builder confidence experienced it’s second largest plunge in history (second only to June 2020) and likely to go negative (drop below 50) in August.
- Companies have begun to announce that they are beginning to lay off people due to what is likely going to be a very rough period for the economy, with more layoffs coming over the next few months.
- These jobs that are being “created” aren’t actually being created right now. They were created when the economy was booming and weren’t filled.
- Inflation continues to skyrocket at a rate not seen since the 1970s despite monthly rate hikes. In June, inflation hit a new 40 year high of 9.1%, with the real inflation rate around 18% (according to Shadowstats.com which tracks the real inflation rate if we measured inflation the same way we measured it in the 1970s).
The economy did shrink at .9% in quarter 2 of 2022, marking the second quarter in a row with negative growth. These numbers do show that we are officially in a recession.
Fed raises interest rates
The Fed raised interest rates yet again to try to cool the economy down and get inflation under control. This is the second month in a row that they decided to raise rates of .75. Several more rate hikes are expected before the end of 2022 if there is no sign of a slowdown in inflation, including at least another “unusually large” rate hike being possible if prices aren’t starting to stabilize by their next meeting in September, according to Fed Chairman Powell.
Powell did want to reassure the public at his press conference yesterday that he isn’t ruling out that a recession is coming but that “I don’t think we have to have a recession”. In 2006, right before the worse recession since the Great Depression then Fed Chairman Ben Bernanke claimed that “implications for future economic activity are positive rather than negative” so these people don’t really have much credibility.
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