Is Recession Knocking on Door in USA?
The GDP figure for the second quarter puts the economy in line with a recognised definition of recession. However, we will not know for months if it has officially been designated one.
In fact, that is because the National Bureau of Economic Research’s Business Cycle Dating Committee does not utilise the widely accepted standard of two consecutive quarters of negative growth.
“a significant decline in economic activity that is spread across the economy and lasts more than a few months.” is defined by the NBER as a recession.
If this continues, it could lead to a series of declines. The National Bureau of Economic Research (NBER) has declared a recession every time GDP has declined for two consecutive quarters since 1948. As reported by the Bureau of Economic Analysis, second-quarter GDP decreased by 0.9 percent whereas first-quarter GDP decreased by 1.6 percent.
As a result, a recession was proclaimed in 2001 by the National Bureau of Economic Research (NBER) even though there had not been two consecutive drops.
As if that was not enough, the National Bureau of Economic Research (NBER) was expected to declare the US economy in recession during the first half of 2022.
Mark Zandi, chief economist of Moody’s Analytics, said, “We were not in a recession for the first half of the year, but the odds are rising that we will be by the end of the year.”
According to Zandi, the NBER’s decision not to declare a recession is largely based on the strength of the economy’s labour market, which has added an average of 457,000 jobs per month this year. There are, however, a number of others.
“We created too many jobs. We had record-low layoffs, we had record-high unfilled positions. Consumer spending, business investment, were all positive,” he said. “I just don’t see them declaring a recession.”
He even questioned the integrity of the GDP numbers, according to Fed Chairman Jerome Powell, who spoke on Wednesday.
Powell opined that the current state of affairs “does not seem like” a recession. It is because the labour market is sending such a strong signal of economic strength that you have to doubt the GDP figures.”