Are We in a Recession?
Jul. 29th, 2022 07:40 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
canyonwalkerIs the US in a recession?
Many people are asking that question since the Commerce Department reported yesterday that US GDP contracted in the 2nd quarter at an annualized rate of 0.9%. That comes on the heels of a 1.6% annualized contraction in the first quarter this year. The commonly understood technical definition of a recession is "two consecutive quarters of negative growth", so it would appear we're there. But it's not that simple.
Officially, recessions are determined by the National Bureau of Economic Research (NBER), a nonprofit organization. And within the NBER the Business Cycle Dating Committee, a group of 8 economists, decide when recessions happen. Generally the Dating Committee only determines that a recession began months after the two-consecutive-quarters definition was met. Largely that's because GDP numbers get revised all the time. Think of the figure announced yesterday as the preliminary number. It could be revised higher or lower as more data from Q2 becomes available.
In addition, the simple definition "two consecutive quarters of negative growth" is not just simple, it's simplistic. Many other factors determine whether the country is in a recession— a label that is fraught with social and political meaning.
A common ingredient of recession— and a key part of that social and political meaning— is unemployment. A recession is a time when unemployment rises, job growth is flat, and wages are stagnant. Right now none of these are the case. Unemployment is 3.6%, still low by historical standards. New jobs are still being added to the economy at a healthy pace, and wages are up a lot this year. Just look at all the stories in the news about how people are leaving jobs because they're being offered more money somewhere else, and employers are struggling to hire. Numerous government officials, from the Treasury secretary to the Federal Reserve chair, have pointed to labor data as a reason why we're not actually in a recession right now.
Keep reading: But most people think we're in a recession....
Many people are asking that question since the Commerce Department reported yesterday that US GDP contracted in the 2nd quarter at an annualized rate of 0.9%. That comes on the heels of a 1.6% annualized contraction in the first quarter this year. The commonly understood technical definition of a recession is "two consecutive quarters of negative growth", so it would appear we're there. But it's not that simple.
Officially, recessions are determined by the National Bureau of Economic Research (NBER), a nonprofit organization. And within the NBER the Business Cycle Dating Committee, a group of 8 economists, decide when recessions happen. Generally the Dating Committee only determines that a recession began months after the two-consecutive-quarters definition was met. Largely that's because GDP numbers get revised all the time. Think of the figure announced yesterday as the preliminary number. It could be revised higher or lower as more data from Q2 becomes available.
In addition, the simple definition "two consecutive quarters of negative growth" is not just simple, it's simplistic. Many other factors determine whether the country is in a recession— a label that is fraught with social and political meaning.
A common ingredient of recession— and a key part of that social and political meaning— is unemployment. A recession is a time when unemployment rises, job growth is flat, and wages are stagnant. Right now none of these are the case. Unemployment is 3.6%, still low by historical standards. New jobs are still being added to the economy at a healthy pace, and wages are up a lot this year. Just look at all the stories in the news about how people are leaving jobs because they're being offered more money somewhere else, and employers are struggling to hire. Numerous government officials, from the Treasury secretary to the Federal Reserve chair, have pointed to labor data as a reason why we're not actually in a recession right now.
Keep reading: But most people think we're in a recession....
