The U.S. economy shrank for the second consecutive quarter, the traditional definition of a recession.
Summary
The U.S. economy shrank for the second consecutive quarter, the traditional definition of a recession. Growth fell 0.9% in the spring amid surging inflation and rising interest rates.
- The economic decline stemmed from factors including, “decreases in inventories, residential and nonresidential investment, and government spending at the federal, state and local levels.”
- The stock market declined slightly in the wake of the GDP report, with the Dow Jones Industrial Average sinking by 0.3% and the Nasdaq Composite Index down by 0.7%.
- The economy shrank by 1.6% in the first quarter. The new GDP report came one day after the Federal Reserve again raised the benchmark interest rate by three-quarters of a point to try and break the inflation raging through the U.S. economy.
- Even as the economy contracted, job growth averaged 456,700 per month in the first half of 2022 and jobless claims remain relatively low.
- The New York Times wrote the new data is “fueling fears that a recession may have already begun” while claiming, “Most economists still don’t think the economy meets the formal definition of a recession, which is based on a broader set of indicators including measures of income, spending, and employment.”
- The Washington Post observed the contraction comes as “Retailers bought fewer items, including cars,” and “consumers shifted their spending away from goods to services such as restaurants and hotels.”
- CNN called the economic news a “symbolic recession threshold” and noted the administration even published an “explainer” claiming the traditional definition of a recession does not constitute a recession.
- FOX News said the economic data put the U.S. into a “technical recession” while noting that relatively strong unemployment and consumer spending indicators make that determination more complex than previous economic declines like the Great Recession.
- Breitbart called the economic contraction the “Bidenpression” and noted that many economists will hesitate to call this a recession until the National Bureau of Economic Research makes a determination using “a more complex and subjective definition of recessions” in the coming months.
- National Review argued “the White House can’t weasel its way out of a recession” and the administration’s efforts to downplay the sour economic news as “not just dishonest but genuinely stupid.” Author Kevin Williamson asked, “When is a recession not a recession? When it is bad for Democratic incumbents.”
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© Dominic Moore, 2022
