There are few good ways for a president or his staff to talk about the economy when the nation is on the precipice of a recession. If a president acknowledges hard reality and concedes that a recession may be imminent, he may inadvertently spur Americans to alter their economic behavior and create a self-fulfilling prophecy. But when the outlook is grim, the president can look naïve, overly optimistic, and out of touch by downplaying the likelihood of a recession.
That’s not a good look in normal circumstances, but it’s terrible for a president who is approaching a likely midterm shellacking, who insisted that inflation would be transitory, that “there’s going to be no circumstance where you see people being lifted off the roof of a embassy in the — of the United States from Afghanistan,” and that he would have to be a “mind reader” to see the infant-formula shortage coming, and so on. Just in time for November, Biden may be telling Americans not to fear a particular dire economic outcome, right before it becomes true.
Yesterday in Delaware, Biden was left to insist that a recession wasn’t inevitable . . .
Q (Inaudible) in Congress are saying a recession is even more likely than ever.
THE PRESIDENT: Not — the majority of them aren’t saying that. Come on, don’t make things up, okay? Now you’re sounding like a Republican politician. I’m joking. That was a joke. But all kidding aside — no, I don’t think it is. I was talking to Larry Summers this morning. And there’s nothing inevitable about a recession.
. . . while also trying to tell Americans to look for the silver linings:
And we also — I’m working with our team is — to put together, at the same time — my dear mother used to have an expression: “Out of everything lousy, something good will happen if you look hard enough for it.”
And today, White House press secretary Karine Jean-Pierre had to offer the finely worded argument that the U.S. was not officially in a recession yet: “Right now, we don’t see a recession right now. We’re not in a recession right now. Right now we’re in a transition where we are going to go into a place of stable and steady growth.”
But the country isn’t going to have to wait too long to hear whether it is in recession. A recession is defined as two consecutive quarters of negative GDP growth. In the first quarter of 2022, the U.S. experienced a shrinkage of about 1.5 percent. The U.S. Bureau of Economic Analysis will release the numbers for the second quarter on July 28.
Some of the Federal Reserve banks regularly update their projections for the next quarter’s GDP. And none of the outlooks are particularly cheery.
The Atlanta Fed’s “GDPNow model estimate for real GDP growth in the second quarter of 2022 is 0.0 percent.” Technically that isn’t two quarters of negative growth, but about as close as you can get; most Americans would likely interpret two quarters of no economic growth as a de facto recession.
The St. Louis Fed currently projects GDP growth of “0.0273 percent” in the next quarter — dodging an official recession by the skin of its teeth.
Meanwhile, the New York Fed model offers a particularly grim assessment: “a contraction by 0.6 percent this year, and another 0.5 percent next year, compared with the Fed’s median forecast for 1.7 percent growth this year and next.”
All of these assessments could be wildly off base, but the range of outcomes appears to be extremely small growth to staying flat to another quarter indicating negative GDP growth. This shouldn’t be surprising; the past two and a half months or so have featured runaway inflation, continuing supply chain problems, and about 11.4 million unfilled jobs during a continuing labor shortage. Businesses are nervous about the coming year, and even if they felt confident, expansion and growth are hindered by those skyrocketing fuel costs, supply chain issues, and labor shortages. Maybe the economy will be able to eke out a little growth in the face of these obstacles, but we shouldn’t count on it.
In other words, there is a good chance that we will learn late next month that Biden was declaring “there’s nothing inevitable about a recession,” while the U.S. was in a recession.