Back in October 2021, at the National Review Institute gathering in Dallas, Kevin Hassett, who was the former chairman of the Council of Economic Advisers under President Trump and a senior adviser to him, offered a fascinating contrast between his usually cheerful and amiable personality and an economic assessment that I described as “darker than Rembrandt’s Night Watch viewed through sunglasses at midnight during a power outage.” Hassett suggested that GDP numbers were going to decline and that a recession was on the way. In autumn 2021, people knew that inflation was a little higher than we wanted it to be, businesses were having a hard time finding workers, and the supply-chain issues were becoming major headaches, but at that time, predicting a recession was still a surprisingly grim assessment. The U.S. was supposed to be enjoying a post-Covid economic boom!
And in the fourth quarter 0f 2021, the GDP number did boom, all the way up to 7 percent. So for a little while, Hassett’s prediction of a recession seemed too pessimistic . . .
. . . but six months later, we’ve now experienced two consecutive quarters of declining GDP, which has been the traditional, rule-of-thumb definition of recession for a long time — just ask Joe Biden’s advisers before this past week.
Once the U.S. experienced one quarter of declining GDP, there was always a good chance that the next quarter would be lousy as well. Inflation continued to rage out of control. Gas prices have declined since mid June, but they’re still high by historical standards. The labor shortage hasn’t changed, and the effort to mitigate supply chain problems is two steps forward, one step back. The Fed hiked interest rates to fight inflation, making it tougher to get loans and purchase homes. Today’s GDP number indicating a decline of nine-tenths of 1 percent isn’t the worst possible news, but it indicates we’re not out of the tough times yet.
I’ve returned to Hassett’s remarks (in April) and warned that the administration was whistling past the graveyard (in June and at the beginning of this month). Yes, the national unemployment rate is low and many businesses are still hiring. But we are still beset by economic problems that usually take long periods of time to resolve. Inflation is paramount, but lots of companies can’t find enough workers, hurting productivity. Many businesses expect the supply-chain issues to last well into 2023 or even longer. And while we thought Covid-19 was in the rear-view mirror, this summer businesses are seeing staffing problems, with some staffers taking vacation while others are calling in sick with mild cases of Covid. None of these factors help increase the national GDP.
The third quarter GDP numbers will be released October 27. If that one is negative, will the administration stop whining about people using the term “recession”?