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Biden Insists There’s No Recession as He Confronts Latest Economic Risk

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After a virtual meeting with tech manufacturing executives on Monday, President Biden was asked about his latest economic headache: How frightened should Americans be that the country is likely to be in a recession?

“We’re not going to be in a recession,” he replied.

The president’s aides have spent much of the past several days making that case publicly, ahead of critical economic data set for release on Thursday that might, no less than informally, signal the beginning of a recession by a typical shorthand definition.

It’s the newest chapter in a challenge that Mr. Biden has faced since taking office: trying, largely unsuccessfully, to steer Americans that the economic recovery is stronger than people perceive.

After greater than a yr of attempting to appease consumer anxieties over soaring inflation, Biden administration officials have segued right into a sustained public campaign to extinguish fears that the nation’s economy has dipped back into recession. Officials have leaned heavily on the strength of the job market and referred regularly to the factors utilized by the economic research committee that formally declares when recessions start and end.

The campaign has been complicated by the Federal Reserve, which has tried to slow the economy in in search of to wrestle inflation under control. On Wednesday, the Fed was expected to make one other supersized rate of interest increase, likely lifting rates by three quarters of a percentage point and raising the chances of a policy-induced downturn later this yr.

The administration’s arguments that the country was not currently in recession were supported by some economic indicators, by many forecasters and by the technical definitions of what constitutes a recession which might be employed by the National Bureau of Economic Research’s business cycle dating committee.

“Consumer spending stays solid, household balance sheets remain in fine condition,” Brian Deese, the director of the National Economic Council, said at a White House briefing on Tuesday. The complete scope of economic data, he said, was “not consistent with a recession.”

However the indisputable fact that Mr. Biden and his aides have spent a lot time keeping off talk of a recession shows just how glum Americans have grown concerning the economy, and why it has been so hard for the administration to vary their minds.

To paraphrase an old political adage: When you’re explaining how recession calls are made, you’re losing.

Mr. Biden has tried for greater than a yr to steer Americans that the economy is robust and that inflation, which has been running at its fastest pace in 40 years, will fade. He has emphasized rapid job creation and a falling unemployment rate, noting on Monday that it was all the way down to 3.6 percent.

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Americans haven’t bought it. Consumer confidence has slumped as food, gasoline and other prices soared. Voter dissatisfaction with Mr. Biden’s economic stewardship has grown, as have attacks by Republicans, who’ve blamed the president’s policies for fueling inflation and eroding Americans’ purchasing power, just months before midterm elections that may determine whether Democrats proceed to manage Congress.

About half of respondents in a June survey of Americans nationwide conducted for The Latest York Times by the net research platform Momentive said they believed the economy was already in a recession or a depression. One other quarter said the economy was “stagnating.” Republican responders were more pessimistic than Democrats, reflecting an ongoing partisan split in views of economic performance depending on who occupies the White House.

But greater than half of independent voters said the country’s economy was in a depression or recession, as did a 3rd of Democrats.

Updated 

July 26, 2022, 7:00 p.m. ET

Administration officials regularly acknowledge the squeeze Americans have felt from rising prices, which have had the effect of reducing the everyday employee’s wages after adjusting for inflation. They’ve also expressed frustration that Mr. Biden had not gotten more credit for a rapid jobs rebound after he inherited an economy that had just began to climb out from the steep and swift pandemic recession of 2020.

Officials have pointed to continuing strong job growth as evidence that the U.S. was not in a downturn, together with an unemployment rate that’s near a 50-year low, and note that gas prices have now fallen for six straight weeks.

Still, the Biden administration’s insistence that the country shouldn’t be in a recession could also be drawing more attention to the dark possibilities currently hanging over the economy than the White House might otherwise wish to see. Fox and CNN set records this week for on-air mentions of the word “recession” within the Biden presidency, and CNBC got here near reaching one as well. Taken together, those three cable networks have mentioned “recession” more times this month than in any month since 2009 except one, in keeping with data compiled by the GDELT Project.

And officials have been keenly aware that the U.S. economy could soon meet a commonly used shorthand for recession, if the Commerce Department reports on Thursday that the economy shrank for a second consecutive quarter this spring.

That definition is straightforward to grasp and widely employed: A recession, it holds, is triggered when the economy contracts for 2 consecutive quarters. In the primary quarter of this yr, the U.S. economy shrank by 1.6 percent. Many forecasters expected Thursday’s gross domestic product report would show further shrinkage within the second quarter, though some projected barely positive growth as a substitute.

Global trends haven’t helped the White House make its case. A depressing forecast from the International Monetary Fund released on Tuesday said some indicators suggested that america was already in a “technical” recession, which the I.M.F. defines within the shorthand way — two consecutive quarters of negative growth. Forecasters warned of slowing growth across America, Europe and China, raising the probabilities of a worldwide downturn.

The administration has tried to make the case that the shorthand recession definition doesn’t fit the strange circumstances of the pandemic recovery within the U.S., especially given the strong labor market. “Each official determinations of recessions and economists’ assessment of economic activity are based on a holistic have a look at the information — including the labor market, consumer and business spending, industrial production, and incomes,” members of the White House Council of Economic Advisers wrote last week.

Treasury Department officials wrote this week that “considerable evidence suggests that the economy shouldn’t be currently in a recession.” They pointed to a divergence within the measurement of economic growth by gross domestic product, which counts the worth of products and services produced within the economy, and an alternate measure called gross domestic income, which counts up wages, profits and investments. Gross domestic product shrank in the primary quarter of the yr, while gross domestic income expanded.

In some ways, there was no need — or ability — to settle the query anytime soon. The Commerce Department will revise its estimate of second-quarter growth no less than twice after its initial reading on Thursday, and it could revise the first-quarter estimate in an annual update later this yr. All those revisions could push the country in or out of the shorthand recession criteria multiple times. A pair tenths of a percentage point on an economic growth reading could tip the scales either way, but Americans could be hard-pressed to note a difference of their day by day lives from it.

Still, the excellence matters each politically and in practical terms. Spiraling economic pessimism has undercut Mr. Biden’s approval rankings and contributed to Democrats’ fears of losing no less than one chamber of Congress within the midterm elections. Worry that the economy was entering a recession could potentially cause consumers to drag back on spending or employers to cut back hiring. Just this week, Walmart slashed its profit forecasts and reported high prices were affecting consumer selections at its stores.

Mr. Biden tried to stir economic optimism on Tuesday, appearing virtually with executives from a Korean company, SK Group, to announce $22 billion in recent investments in america. Mr. Biden said the investments were “further proof that America is open for business.”

Perhaps the most important political danger for Mr. Biden is that he finally ends up correct about the opportunity of a recession within the moment, but fallacious down the road. Even when the economy grew within the second quarter, it could fall into recession this summer or right before the midterms, especially if global oil prices spike again, a development administration officials were attempting to head off.

The I.M.F. warned on Tuesday that the risks for the worldwide economy were “overwhelmingly tilted to the downside.” It revised down its projections of growth in america, forecasting just 0.6 percent annual growth for the fourth quarter of 2023.

Such a slowdown, I.M.F. officials wrote, “will make it increasingly difficult to avoid a recession” — irrespective of the way you define the term.

Ben Casselman contributed reporting.

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