After a virtual meeting with tech manufacturing executives on Monday, President Biden was asked about his latest economic headache: How worried should Americans be that the country could be in a recession?
“We’re not going to be in a recession,” he replied.
Aides to the president have spent much of the past few days publicly making that case, before critical economic data is released on Thursday that could, at least informally, signal the start of a recession by a common shorthand definition.
It is the latest chapter in a challenge Biden has faced since taking office: trying, largely unsuccessfully, to persuade Americans that the economic recovery is stronger than people perceive.
After more than a year of trying to quell consumer concerns about rising inflation, Biden administration officials have launched a sustained public campaign to quell fears that the nation’s economy has slipped back into a recession Officials have relied heavily on the strength of the labor market and have frequently referred to the criteria used by the economic research committee that formally states when recessions start and end.
The campaign has been complicated by the Federal Reserve, which has tried to slow the economy by trying to control inflation. On Wednesday, the Fed was expected to make another big interest rate hike, likely raising rates by three-quarters of a percentage point and raising the odds of a policy-induced recession later this year.
The administration’s arguments that the country was not currently in a recession were supported by some economic indicators, by many forecasters, and by the technical definitions of what constitutes a recession used by the Business Cycle Dating Committee of the National Bureau of Research. Economic.
“Consumer spending remains strong, household balance sheets remain in good shape,” Brian Deese, director of the National Economic Council, said at a White House briefing on Tuesday. The full extent of the economic data, he said, “was not consistent with a recession.”
But the fact that Biden and his aides have spent so long avoiding talk of a recession shows just how gloomy Americans have become about the economy and why it has been so hard for the administration to change their minds.
To paraphrase an old political adage: If you’re explaining how recession calls are made, you’re losing.
Biden has been trying for more than a year to persuade Americans that the economy is strong and that inflation, which has been running at its fastest pace in 40 years, will fade. He has emphasized rapid job creation and a falling unemployment rate, noting on Monday that it had dropped to 3.6 percent.
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Americans haven’t bought it. Consumer confidence has plummeted as food, gasoline and other prices soared. Voter dissatisfaction with Biden’s economic handling has grown, as has attacks from Republicans, who have blamed the president’s policies for fueling inflation and eroding the purchasing power of Americans, just months before the elections. midterm elections that will determine whether Democrats continue to control Congress.
Roughly half of those surveyed in a June poll of Americans across the country conducted for The New York Times by the online research platform Moment they said they believed the economy was already in a recession or depression. Another quarter said the economy was “stagnant.” Responding Republicans were more pessimistic than Democrats, reflecting an ongoing partisan divide in views of economic performance based on who occupies the White House.
But more than half of independent voters said the country’s economy was in a depression or recession, as did a third of Democrats.
Administration officials frequently acknowledge the pressure Americans have felt from rising prices, which have had the effect of lowering the wages of typical workers after adjusting for inflation. They also expressed frustration that Biden did not get more credit for a quick rebound in jobs after he inherited an economy that had only just begun to emerge from the strong and fast 2020 pandemic recession.
Officials have pointed to continued strong job growth as evidence that the US was not in a recession, along with an unemployment rate that is near a 50-year low, noting that gas prices have now fallen. for six consecutive weeks.
Still, the Biden administration’s insistence that the country is not in a recession may be drawing more attention to the dark possibilities currently looming over the economy than the White House would like to see. Fox and CNN set records this week for on-air mentions of the word “recession” under Biden’s presidency, and CNBC also came close to hitting one. Collectively, those three cable networks have mentioned “recession” more times this month than in any month since 2009, except one, according to data collected by the GDELT Project.
And officials have been well aware that the US economy could soon find itself in a commonly used shorthand for recession, if the Commerce Department reports Thursday that the economy shrank for the second straight quarter this spring.
That definition is easy to understand and widely used: A recession, he argues, is triggered when the economy contracts for two consecutive quarters. In the first quarter of this year, the US economy shrank 1.6 percent. Many forecasters had expected Thursday’s gross domestic product report to show further contraction in the second quarter, though some projected slightly positive growth.
Global trends have not helped the White House make its case. A gloomy International Monetary Fund forecast released Tuesday said some indicators suggested the United States was already in a “technical” recession, which the IMF defines for short: two consecutive quarters of negative growth. Forecasters warned of slowing growth in the United States, Europe and China, raising the chances of a global recession.
The administration has tried to show that the shorthand definition of a recession does not fit the strange circumstances of the US recovery from the pandemic, especially given the strong job market. “Both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at data, including the labor market, consumer and business spending, industrial production, and income. “, members of the Council of Economic Advisers of the White House. wrote last week.
Treasury Department officials wrote this week that “considerable evidence suggests that the economy is not currently in a recession.” They pointed to a divergence in measuring economic growth by gross domestic product, which counts the value of goods and services produced in the economy, and an alternative measure called gross domestic income, which counts wages, profits, and investments. Gross domestic product contracted in the first quarter of the year, while gross domestic income expanded.
Somehow, there was no need, or ability, to resolve the issue any time soon. The Commerce Department will revise its second-quarter growth estimate at least twice after its initial reading on Thursday, and could revise the first-quarter estimate in an annual update later this year. All of those revisions could push the country in or out of the shorthand recession criteria multiple times. A couple of tenths of a percentage point in an economic growth reading could tip the scales either way, but it would be hard for Americans to tell a difference in their daily lives from it.
Still, the distinction matters both politically and in practical terms. Growing economic pessimism has undermined Biden’s approval ratings and contributed to Democrats’ fears of losing at least one house of Congress in the midterm elections. Worry that the economy is entering a recession could cause consumers to cut spending or employers to cut back on hiring. Just this week, Walmart cut its earnings forecasts and reported that high prices were hurting consumers’ choices in its stores.
Mr. Biden tried to spark economic optimism on Tuesday, appearing virtually with executives from a Korean company, SK Group, to announce $22 billion in new investment in the United States. Biden said the investments were “further proof that America is open for business.”
Perhaps the biggest political danger for Biden is that he ends up being right about the possibility of a recession now, but wrong later. Even if the economy grew in the second quarter, it could slip into recession this summer or just before the midterm elections, especially if global oil prices rise again, something development administration officials were trying to avoid.
The IMF warned on Tuesday that risks to the world economy were “overwhelmingly tilted to the downside.” It revised down its projections for growth in the United States, forecasting just 0.6 percent annual growth for the fourth quarter of 2023.
Such a slowdown, the IMF officials wrote, “will make it increasingly difficult to avoid a recession,” no matter how the term is defined.
ben casselman contributed report.