On the menu today: In a week full of big economic-news releases, on Thursday morning, the U.S. will learn if we’ve experienced two consecutive quarters of the GDP shrinking — the traditional definition of a recession. Treasury secretary Janet Yellin and other Biden officials are already arguing that we’re not in a recession — which seems like a clear hint that they expect Thursday’s numbers to be ugly. But to the average American, “recession” is a synonym for “economic hard times” — and with inflation at 9.1 percent, lots of Americans feel squeezed.
Welcome to ‘It’s Not a Recession, We Swear!’ Week
Politico’s Ben White characterizes this week as a “Category 5 economic storm,” but I think the dominant theme will be, “It’s not a recession, we swear!”
As much as economy-watchers will be studying the Consumer Confidence Index numbers on Tuesday and the Federal Reserve meeting and decision on interest rates Wednesday, the biggest deal will be the numbers for second-quarter economic growth, announced at 8:30 a.m. Eastern Thursday morning. We don’t know what the second-quarter economic numbers are going to be, but they’re probably not going to be good. The Atlanta Fed thinks it will show that the U.S. GDP shrank 1.6 percent in the last quarter. The previous quarter was a decline of 1.6 percent as well — so if the Atlanta Fed projection is correct, Thursday will bring news that the U.S. is now in a recession, at least by the traditional definition. (Even if it doesn’t, and it shows GDP growth at 0.0 or slightly higher, the U.S. is still in lousy near-recessionary conditions.)
Biden and his team will argue that, despite the numbers, the U.S. isn’t really in a recession. In fact, White writes that if Republicans declare we’re in recession, “It will not be true. At least not yet. But President Joe Biden and Democratic candidates across the country will face a daunting and possibly impossible challenge explaining to people why it’s not true.”
On Meet the Press yesterday, Yellen had the unenviable task of convincing Americans that even though it may look like a recession, sound like a recession, and feel like a recession, it’s not really a recession:
SEC. JANET YELLEN: I do want to emphasize: What a recession really means is a broad-based contraction in the economy. And even if that [second-quarter-GDP-growth] number is negative, we are not in a recession now. And I would, you know, warn that we should be not characterizing that as a recession —
CHUCK TODD: I understand that, but you’re splitting hairs. I mean, if the technical definition is two quarters of contraction, you’re saying that’s not a recession?
YELLEN: That’s not the tech —
TODD: No?
YELLEN: That’s not the technical definition. There’s an organization called the National Bureau of Economic Research that looks at a broad range of data in deciding whether or not there is a recession. And most of the data that they look at right now continues to be strong. I would be amazed if the NBER would declare this period to be a recession, even if it happens to have two quarters of negative growth. We’ve got a very strong labor market. When you’re creating almost 400,000 jobs a month, that is not a recession.
The National Bureau of Economic Research isn’t exactly speedy about these declarations. Back in December 2008, it announced that the U.S. was in a recession . . . that had begun almost one year earlier in January 2008.
It is indeed true that it’s odd to see an economic recession when unemployment is at just 3.6 percent. The other counterargument that the Biden administration keeps trotting out is that companies are hiring, which is usually the opposite of what happens in a recession. As of May, the U.S. had 11.3 million unfilled jobs.
But an unfilled job doesn’t actually produce anything — other than perhaps help-wanted ads — which means that those 11.3 million openings aren’t contributing to the GDP. The Biden administration is pointing to the near-record number of job openings as a sign of economic strength. But all those empty office cubicles, empty spots on the assembly line, unanswered calls, and unfilled wait-staff shifts feel a lot more like a sign of economic weakness. Peggy Noonan offered a vivid description in her column this weekend:
Retailers big and small struggle to find and retain employees. Beaches and pools can’t find lifeguards. Police forces can’t find young men and women to apply. The U.S. Army can’t find recruits. Doctors offices strain to fill a job when somebody leaves. Airlines are so short-staffed there’s no one to help you find luggage that’s been lost for two weeks. There’s no one to keep it from being lost. The other night a Midwestern city official told CNN, of the struggle to hire cops, “It’s like the American workforce vanished.”
There are still a lot of, “Please be patient, we are understaffed” signs in the front of restaurants around the country, a lot of retail stores with only one or two registers open, and a lot of pharmacies with only one pharmacist trying to manage the phone and the line of customers in front of her. Those aren’t signs of a thriving economy.
The U.S. Chamber of Commerce notes that:
The U.S. has 3.25 million fewer Americans working today compared to February of 2020. . . . Right now, the latest data shows that we have over 11 million job openings in the U.S. — but only 6 million unemployed workers. We have a lot of jobs, but not enough workers to fill them. If every unemployed person in the country found a job, we would still have 5.4 million open jobs.
If the economy were as strong and healthy as the Biden team and congressional Democrats want it to be, there would be Americans working in those jobs.
The reason it will be so difficult for Biden to explain that this isn’t really a recession is because in the American public’s mind, a recession is a de facto synonym for “economic bad times.” With inflation at 9.1 percent, Americans are feeling an intense financial squeeze because everything is more expensive now. The price hikes aren’t gradual; they’re sudden and noticeable. And these aren’t price hikes that a person notices for once-in-a-while purchases, like a new home purchase or a new car purchase. These are noticeable price hikes in everything they buy, particularly groceries and gasoline.
There’s a curious trend in economic journalism lately, contending that Americans are just too pessimistic, and that most Americans are doing much better than they are willing to admit.
This New York Times write-up of a survey in mid July is a good example: “Just 10 percent of registered voters say the U.S. economy is ‘good’ or ‘excellent,’ according to a New York Times/Siena College poll — a remarkable degree of pessimism at a time when wages are rising and the unemployment rate is near a 50-year low.”
But here’s a feature story in the Times on the impact of inflation from just a few weeks earlier:
In May 2021, the average price of a dozen large eggs was $1.60. A year later, it was $2.80 — an increase of 75 percent. Ground beef is up 13 percent per pound. A gallon of whole milk costs one-fifth more. Overall, grocery prices were 12 percent higher last month than they were a year earlier, according to the Bureau of Labor Statistics. That was the largest year-over-year increase since 1979.
At the same time, the average driver was paying nearly $275 a month at the pump, up from $167 in June 2021, when a gallon of gas was $3.07, according to Kelley Blue Book’s calculations. Rents, too, are escalating. The median monthly rent was nearly $1,850 in May, according to Realtor.com, up 26 percent from 2019, before the pandemic.
This morning, the Wall Street Journal serves up an article on upper-middle-class Americans who are watching their economic gains of 2020 and 2021 erode in 2022. The article notes that, “Upper-middle-class households are defined here as those earning between $75,301 and $127,300 a year.” (In parts of the country with high costs of living, that doesn’t seem all that upper!) Lots of people, particularly on the left, are likely to scoff that these Americans are sufficiently well-off that they need no sympathy — which illuminates just how conditional their much-touted empathy is. Upper-middle-class families must pay their mortgages, grocery bills, and gas bills, and for college educations and retirement, too.
Many economic writers — who I suspect are sympathetic to the administration — keep asking, “Why do the American people keep demonstrating this remarkable degree of pessimism?” And the American people keep answering, “Because everything is so flippin’ expensive these days!”
Between now and the midterms, Yellin, Biden, and the rest of the Democrats will be trying to convince Americans that they’re more prosperous than they feel. I suspect you would have an easier time convincing Americans that they’re taller than they feel.
ADDENDUM: President Biden, while speaking to reporters last week, shortly before he tested positive for Covid-19:
Q: Mr. President, do you think it’s a good idea for Speaker Pelosi to travel to Taiwan this summer?
THE PRESIDENT: Well, I — I think that — the military thinks it’s not a good idea right now, but I don’t know what the status of it is.
And then Biden moved on to another question about declaring a public-health emergency for abortion.
As the Wall Street Journal notes, Pelosi’s trip would have symbolic significance, as she would be the first House speaker to visit Taiwan in 25 years, and this is one of the rare issues where the typical Republican is likely to say, “Go, Pelosi, go!” The Chinese government is rattling its sabers and attempting to intimidate the U.S. government. The Chinese government has no authority to deny American officials the right to visit Taiwan.
The question is, will the Biden administration allow itself to be intimidated?
The Journal’s editors conclude, “If China can stop a senior U.S. official from visiting Taiwan, how resolute is America going to be in a shooting war?”
Notice that Biden doesn’t say whether he thinks it’s a good idea. He just says “the military” — Who? When did they say this? Why did they say this? — thinks it’s not a good idea right now. He doesn’t argue that Pelosi shouldn’t go, exactly, but he doesn’t say she should go, either. He just ominously implies that the Pentagon sees some sort of threat afoot and moves on to another subject.
In the most recent issue of NR, our Andy McCarthy describes Biden as the “confounder in chief” – a man who uses confusing jumbles of words that are often de facto retracted. “Biden’s words are meaningless. Of that, there is no better testament than the soles of his advisers’ shoes, worn away by the speed and regularity with which those words are walked back.”
Does Biden not want Pelosi to go to Taiwan? Who knows? We shouldn’t expect too much from him; he’s only the president.