President Joe Biden on Thursday responded to a report showing the economy shrank for a second consecutive quarter, which by some definitions, means the United States has technically entered a recession.
The Bureau of Economic Analysis said Thursday that gross domestic product, or GDP, shrunk 0.9 percent at an annualized pace for the second quarter, following a 1.6 percent decline in the first quarter.
“Coming off of last year’s historic economic growth–and regaining all the private sector jobs lost during the pandemic crisis–it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” Biden said in a statement after Thursday’s figures were released. “But even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure.”
Biden then said the U.S. job market “remains historically strong” and “consumer spending continues to grow.”
Officially, the National Bureau of Economic Research (NBER) is the entity that declares recessions and expansions. It’s not clear when the organization will make its official judgment on the state of the U.S. economy.
The White House and some legacy news outlets have been criticized for downplaying the risk of a recession and attempting to change the common definition of a recession. A second straight negative GDP posting is a long-held view that an economy is technically in a recession.
“Two negative quarters of GDP growth is not the technical definition of recession,” National Economic Council adviser Brian Deese told reporters on Tuesday. “The most important question economically is whether working people and middle-class families have more breathing room.”
Consisting of eight prominent economists, NBER has previously said that it relies on more data than just GDP to determine whether a recession is occurring or not. Those factors include unemployment, consumer spending, and the depth of economic decline.
Despite Biden pushing a narrative Thursday that the economy is on the “right path,” some economists weren’t so sure. Notably, Consumer Price Index showed inflation reached 9.1 percent in June—the highest figure since November 1981.
“Message is clear from the negative US GDP print (-0.9%) and unfavorable miss on jobless claims: The US #economy is slowing at a significant rate,” economist Mohamed El-Erian wrote on Twitter shortly after the GDP data was published. “Add to that the 8.7% price change in today’s data and the bottom line is clear: Deepening stagflation and flashing red recession risk.”
The head of the National Association of Home Builders (NAHB), which monitors homebuilding—a key segment of the U.S. economy—said that a recession is in the works.
“We’re heading into a recession,” NAHB CEO Jerry Howard told Bloomberg News this week, adding that a decline in home construction and a demand for new homes will likely cause the economy to sink further.
But other analysts weren’t so sure.
“Today’s reading only adds fuel to the fire that we are in or entering a recession,” said Mike Loewengart, managing director at E*Trade from Morgan Stanley. “While it is certainly on the negative side of estimates, keep in mind that a 1% decrease is relatively small and supports the idea that any recessionary environment will be mild.”
Reuters contributed to this report.