It’s hard to remember that the White House is putting as much effort into spinning economic data as the Biden team did with Thursday’s GDP report.
- There is a real possibility that it will appear in the second consecutive quarter of contraction. This will likely lead to more stressful – and confusing – rhetoric about the health of the economy.
why does it matter: Debates over whether the recession has begun are characterized by both misleading criticism of Biden’s economy And the Excessive dismissal of the economic risks awaited by the administration’s allies.
- To protect you from both, here are five main points to keep in mind.
1. US economists are really delaying to the Business Cycle Dating Committee at the National Bureau of Economic Research to make judgments about when recessions begin and end, and for decades. This is not a new idea devised by Biden’s team to avoid accusations of stagnation.
- The committee bases its decisions on a broad range of data, not on the “two consecutive quarters of GDP contraction” that commentators often invoke.
- but that he is It is an agreement that has long been adopted by media organizations and economists. The New York Times – wrote in September 1974: “For nearly all economists, a recession is what the office says.”
2. Even if the Biden team is right That the economy did not slip into recession during the first half of the year – which, based on the data confirmed by the NBER Committee, appears to be correct – does not mean we are in the clear.
- There is a distinct possibility that the economy was still expanding in June, but the recession started in July, or in August or later. Some evidence is already pointing in this direction.
3. Not in the doldrums, everything is fine: For ordinary civilians, “stagnation” can be an umbrella term for when economic conditions feel cramped. So it makes sense that ordinary people would see the current environment, when inflation is rising faster than wages, as a recession.
- But for economists, a “stagnation” is precisely a period of widespread contraction in economic activity.
- The deep recession technically ended in mid-2009, for example, but the “unemployment recovery” is still pretty bad in 2010.
4. The National Bureau of Economic Research is slow, but not political. The business cycle dating committee is not meant to be the first to call for slack, but rather to make final judgments that don’t need to be reviewed later.
- So even if a recession begins this summer, the committee won’t make a call until the data conclusively points to that trend, which could take several months.
- Among the eight economists who make up the committee are a couple with specific political leanings: Robert Hall, who has chaired the committee since 1978, works for the conservative Hoover Institution; Member Christina Romer was Obama’s economic advisor. But they are mostly nonpartisan technocrats.
5. This whole discussion It may be moot. Granted, GDP may have contracted in the second quarter – but expectations are for the number to be somewhat positive, rising at a 0.5% annualized rate.
- Moreover, regardless of the preliminary GDP announcement on Thursday morning, it will be broadly revised as more complete data becomes available, which could turn into a positive negative number or a negative positive number.
- From the so-called “advanced” GDP estimate to the final estimate, the average swing in the annual growth rate is 1.2 percentage points, says the Bureau of Economic Analysis — and it could go either way.
Bottom line: There will be a lot of focus on Thursday, especially if it’s negative. But the more important question is whether the economy, as measured by a wide range of indicators, is able to maintain its momentum or is faltering as the downturn approaches.