U.S. President Joe Biden delivers remarks on the Inflation Reduction Act of 2022 at the White House in Washington, U.S., July 28, 2022.
Elizabeth Frantz | Reuters
WASHINGTON — The White House responded to second-quarter negative GDP growth with a full slate of events and a well-coordinated message: Despite what everyone is saying, the U.S. economy is not in a recession.
President Joe Biden appeared in public twice Thursday, and both times he delivered the same carefully crafted remarks, contending that current low unemployment rates, coupled with new investments in manufacturing, make it impossible for the economy to be in a recession.
“Let me just give you what the facts are in terms of the state of the economy,” Biden said in a speech that was billed as remarks on the latest budget bill in Congress. “Number one, we have a record job market, and record unemployment of 3.6%, and businesses are investing in America at record rates.” He then listed several companies planning to build factories in the U.S. before concluding, “that doesn’t sound like a recession to me.”
Outside the White House bubble, however, the latest GDP data sounded a lot like a recession.
On Thursday, the Commerce Department’s Bureau of Economic Analysis reported that gross domestic product, the broadest measure of economic activity, fell 0.9% in the second quarter.
Coming on the heels of a 1.6% contraction in the first quarter, the two straight declines meet the most commonly used definition of a recession. The official arbiter of recessions, the National Bureau of Economic Research, likely won’t rule for months.
Later in the day, Biden held a roundtable event with five chief executives of major companies, also aimed at showcasing the strength of the American economy. The leaders of Corning, Marriott International, Bank of America, TIAA and Deloitte were all present, with Marriott’s Tony Capuano and Corning’s Wendell Weeks attending in person.
“There’s gonna be a lot of chatter today on Wall Street and among pundits about whether we are in a recession,” Biden said in his opening remarks. “But if you look at our job market, consumer spending, business investment, we see signs of economic progress in the second quarter, as well.”
Biden also quoted Federal Reserve Chairman Jerome Powell, who said Wednesday that he did not believe the economy was currently in a recession because “there are too many areas of economic growth where the economy is performing too well.”
What Biden did not mention was that Powell was speaking moments after the Fed announced a second 0.75 percentage point rate hike in as many months, the first time in the modern history of the central bank that it has had two rate increases of three-quarters of a point back to back.
Biden was not the only major figure who went before the cameras Thursday to contend that what the U.S. economy is experiencing is not, in fact, a recession. Treasury Secretary Janet Yellen held a rare, stand-alone news conference at the Treasury in between the president’s two events.
Yellen insisted that a recession is a “broad-based weakening of our economy” that includes substantial layoffs, business closures and strains in household finances.
“That is not what we are seeing right now,” she said. “When you look at the economy, job creation is continuing, household finances remain strong, consumers are spending and businesses are growing.”
Several other White House officials went on cable news shows to make similar arguments, including National Economic Council Director Brian Deese.
Appearing Thursday on CNBC’s “Squawk on the Street” Deese said that although the post-pandemic economic boom was slowing, this did not amount to a recession.
“I think if you look at the full data and the type of data that NBER looks at, virtually nothing signals that this period in the second quarter is recessionary,” he said, referring to the National Bureau of Economic Research.
But what individuals believe to be true about the economy could prove to be a more powerful economic indicator than what is actually true.
In the past few months, consumer and business confidence levels have plunged. And recent surveys show that a solid majority of Americans believe the country is in a recession.
This is in large part because soaring inflation has cut deep into the buying power of the average American worker’s paycheck, rising to 9.1% in June, and economic growth has failed to keep up.
People who are worried about a recession are likely to rein in their household spending and delay major purchases, which in turn can have its own negative ripple effect throughout the economy.
With Democrats already facing headwinds in this November’s midterm elections, swaying individual voters’ opinions about the state of the economy is critically important for Biden and his party to do right now if they hope to maintain control of at least one chamber of Congress.
But with just 13 weeks between now and the November elections, it may already be too late.
— CNBC’s Jeff Cox contributed to this story.
Correction: National Economic Council Director Brian Deese appeared on CNBC’s “Squawk on the Street.” An earlier version misstated the name of the program.