The US economy is down again, the shadow of recession is showing

US gross domestic product (GDP) contracted again in the second quarter, raising risks of the world’s largest economy falling into recession, months before a key election for Joe Biden. and the Democrats.

The decline in GDP is 0.9% at an annual rate, a measure favored by the United States, comparing the previous quarter and then projecting the evolution of the whole year, according to figures released on Thursday by the Department of Commerce. Weak growth is expected, after a decline, already in the first quarter, of 1.6%. The decline in GDP in the quarter was 0.2% compared to the previous quarter, as in other advanced economies.

The generally accepted definition of a recession corresponds to two consecutive quarters of declining GDP. But the current situation “doesn’t look like a recession, in my opinion”, Joe Biden reacted. Its Finance Minister Janet Yellen also noted at home that the US economy remains “resilient”, even if it is “slowing”.

Inflation reached a new record in June, at 9.1% for a year. And slowing it down requires a cooling of economic activity. However, it is “possible to slow down inflation and maintain a stable labor market,” according to the Minister.

“Most economists and most Americans have the same definition of a recession: big job losses and big layoffs,” the Treasury Secretary said at a press conference. “This is not what we are looking at now”, he explained, highlighting more than one million jobs created in the last three months, and preferring to stimulate “an economy transitioning towards stronger growth and strong.

“Redefining the economy”

The opposition, however, rejected “Joe Biden’s recession. The economy has fallen for two quarters in a row,” commented the Republican Party on Twitter. “The government just announced what every American feels about a year – we’re in a recession,” said Kevin McCarthy, House Republican leader. He also accused Democrats of “(preferring) to redefine the recession rather than restore a healthy economy”.

The decline in GDP in the second quarter reflected lower business investment and household home purchases, the Commerce Department said. Governments, both federal and local, have also curbed their spending.

Consumption, the engine of American growth, remains, but thanks to the cost of services, and especially rents, the prices that have increased with inflation. Purchases of goods decreased.

“Avoid a semantic war”

So, is the United States falling into a recession or not? It seems that the debate that has been raging for days has started again. “We have to avoid a semantic fight,” Yellen declared. “Sometimes people use the word recession to say it’s bad inflation.”

“We doubt the economy is in recession because of the strength of the labor market,” Lydia Boussour and Kathy Bostjancic, economists at Oxford Economics, said in a note. The unemployment rate, at 3.6%, is very close to pre-pandemic levels, which are the lowest in 50 years, and employers are still struggling to recruit.

The decline in GDP “reinforces stagflation (stagnation of activity and inflation), and triggers a red alert for recession”, warned economist Mohamed El-Erian, president of Queens’ College, on Twitter. at the University of Cambridge, and economics. adviser to the insurer Allianz.

Only one organization in the United States is authorized to officially identify recessionary periods: the National Bureau of Economic Research (NBER). But his announcements would come months later. “We consider a series of indicators”, the NBER details on its site, which also looks at “the scope of the decline in activity”.

Leave a Reply

Your email address will not be published.