Yellen insists the US is not in recession, as the economy shrank 0.9 percent in the second quarter. OLASMEDIA TV NEWSThis is what we have for you today:
The US economy shrank by 0.9 percent in the second quarter of the year, further fueling fears that the country is heading into recession.
Thursday morning’s data from the Bureau of Economic Analysis, part of the Commerce Department, showed gross domestic product contraction – the broadest measure of economic output – for a second quarter in a row.
Back-to-back negative GDP quarters are an informal definition of recession, but most economists point to a still robust labor market, with 11 million job openings and an unusually low unemployment rate of 3.6 percent. They argue that a recession, if it were to occur, is still a long way off.
Treasury Secretary Janet Yellen agreed at a White House press conference when President Joe Biden asked him about the health of the US economy.
“Right now there is a huge array of global headwinds,” she said. “But our economy remains resilient.”
“Today’s GDP report shows that growth and private demand have slowed,” Minister Yellen also noted, “but job creation continues,” she said, adding that household finances remain robust.
The Commerce Department’s report comes just a day after the US Federal Reserve raised its benchmark rate by 0.75 percent for the second time in a row as it continues its efforts to contain the worst inflation spike in four decades.
With the June consumer price index up 9.1 percent from a year ago, the Fed is aiming for a notoriously difficult “soft landing” — an economic slowdown that manages to contain skyrocketing prices without triggering a recession.
The strength of the US job market, Federal Reserve Chairman Jerome Powell said at a news conference on Wednesday, “makes you doubt the GDP data.”
When asked if he thought the US was in recession, Mr Powell predicted Secretary Yellen’s comments and said he didn’t think it was. now a recession.
Mr Powell also rightly noted that US GDP data is often revised at a later date. In its Thursday morning press release, the BEA noted that the GDP estimate was based on source data that is either incomplete or subject to revision by the source agency and that the second estimate for the quarter will be released on August 25.
Speaking with business leaders in the White House on Thursday, President Joe Biden downplayed talk of a possible recession and said growth this year would be “no doubt” slower than last year, when the economy largely returned to normal after a year. of Covid-19-related shutdowns.
“There will be a lot of talk today on Wall Street and among experts about whether we are in a recession. But if you look at our labor market, consumer spending and business investment, we also see signs of economic progress in the second quarter,” he said.
The most widely accepted definition of a recession comes from the National Bureau of Economic Research, a group of economists whose Business Cycle Dating Committee defines it as “a significant drop in economic activity that spreads across the economy and lasts longer than a few months.” .
Labor market strength is just one factor that skews the data, but the NBER often reports the onset of a recession long after, so additional data and revisions should be monitored closely.
In a statement released by the White House earlier in the day, President Joe Biden said: “It’s no surprise that the economy is slowing as the Federal Reserve tries to curb inflation. But even as we face historic global challenges We are on the right track and will come through this transition stronger and safer.Our labor market remains historically strong, with unemployment at 3.6 percent and more than 1 million jobs in the second quarter alone.Consumer spending continues to grow .”
Prior to the release of today’s data, forecasters, polled by data firm FactSet, had estimated that the country’s GDP made a lukewarm annual gain of 0.8 percent between early April and late June. Others believed that a 0.2 percent anemia was possible.
The Federal Reserve Bank of Atlanta’s running estimate of GDP growth, based on available economic data, indicated a 1.2 percent decline in Q2.
Today’s data still points to a decline in economic activity, but is an improvement from the 1.6 percent decline seen in the January-March quarter.
Yet such weak quarterly growth represents a drastic weakening of the 5.7 percent growth the economy realized last year. That was the fastest calendar year expansion since 1984, reflecting how vigorously the economy recovered from the brief but brutal pandemic recession of 2020.
However, the first quarter figures were not as alarming as the headlines suggested, as a wider trade deficit driven by increased demand for foreign goods reduced 3.2 percent of overall growth.
Going deeper into the details of Thursday’s release, the decline in real GDP in the second quarter reflected a decline in inventory investment, housing investment, federal government spending, state and local government spending and business investment.
However, exports and consumer spending rose. Imports, which had such an impact on the first quarter figures, continued to rise, deducting from total GDP.
Nevertheless, regardless of whether the data says the US is in a recession or not, inflation problems continue to affect Americans’ everyday lives and the way to deal with them is to slow the economy.
Speaking on Thursday morning, author and CNBC host Andrew Ross Sorkin noted that while things seem to be moving in the wrong direction faster than expected, here’s what should be happening.
“I think it’s a fair view that this is what should happen if the Federal Reserve did what it did, which is put its hands on the neck of the economy to slow things down… and now it’s working “It’s a bit of an odd feeling to say this is what we wanted, but we’re going to have a slower economy now.”
Mr Sorkin noted that with the upcoming midterm elections, the word “recession” has become a political football and Americans feel that things are very different now than they were 12 months ago when the economy recovered from the pandemic.
After the release of the GDP data, markets remained stable, Mr Sorkin reasoned, “in large part because there is now a view that the Federal Reserve doesn’t have to choke the economy the way it has. .” ”.
With additional coverage from The Associated Press