Um, what: “both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data.”
The left excels at changing definitions when it suits them.
We expect a dismal economic report this week. We expect another report with a falling Gross Domestic Product (GDP), which shows the state of our economy.
The definition of GDP from the Bureau of Economic Analysis at the U.S. Department of Commerce:
The value of the goods and services produced in the United States is the gross domestic product. The percentage that GDP grew (or shrank) from one period to another is an important way for Americans to gauge how their economy is doing. The United States’ GDP is also watched around the world as an economic barometer.
The consensus is that a recession is when we have “two consecutive quarters of negative growth.”
The first quarter of 2022 saw America’s GDP shrink “at an annual pace of 1.6%.” This was in the “third and final revision by the Bureau of Economic Analysis.”
If America had negative growth in the second quarter, we would be in a recession. That is not good news.
The White House and Secretary of Treasury Janet Yellen are trying to get ahead of the report by changing the definition of recession.
White House Council of Economics chair Cecilia Rouse and member Jared Bernstein tried to explain how economists determine a recession with a bunch of mumbo jumbo. I had a hard time getting past their insistence that “both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data.” That was only the second line.
But read that again.
“Holistic look at the date.” What is that?! What does that mean?
In other words, they get to decide what a recession means. They can make the report as pretty and happy as they want to, even if it’s an awful report.
Wait, it gets better. Rouse and Bernstein tried to use the recession definition from the National Bureau of Economic Research (NBER)to strengthen their argument.
Except…the definition matches the consensus. The definition voids their argument:
The National Bureau of Economic Research (NBER) Business Cycle Dating Committee—the official recession scorekeeper—defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
A quarter is three months. Two quarters are six months. That means two quarters are “more than a few months.” Shoot, even one quarter is “more than a few months.”
Yellen, who we should watch closely, made it worse on Meet the Press with Chuck Todd:
TODD: “If the technical definition is two quarters of contraction, you’re saying that’s not a recession?”
YELLEN: “That’s not the technical definition. There is an organization called the National Bureau of Economic Research that looks at a broad range of data in deciding whether or not there is a recession. And most of the data that they look at right now continues to be strong. I would be amazed if they would declare this period to be a recession, even if it happens to have two quarters of negative growth. We have a very strong labor market. when you are creating almost 400,000 jobs a month, that is not a recession.”
So Yellen wants to use the same definition that voids the blog post by Rouse and Bernstein.
Yellen digs a bigger hole because when you have to explain, you’re losing:
“But you don’t see any of the signs now — a recession is a broad-based contraction that affects many sectors of the economy—we just don’t have that. Consumer spending remains solid. It’s continuing to grow. Output, industrial output has grown in five of the six most recent months. Credit quality remains very strong. household balance sheets are generally in good shape.”
Remember that while people have jobs, their salaries are not going up with prices.
Yellen is not wrong, but she does not expand. Our balance sheets are in good shape, but we’ve all had to drastically cut our budgets and lifestyles.
Then Yellen admits the administration is just flailing to try to get control of the economy when in reality, they need to back off:
“But inflation is way too high. And, you know, the Fed is charged with putting in place policies that will bring inflation down and I expect them to be successful. The Administration, for its part, is supplementing those Fed policies with things we can do. We’ve cut the deficit by a record one-and-a-half trillion dollars this year, releases of gas from the Strategic Petroleum Reserve are putting some downward pressure on gas prices. we have seen gas prices just in recent weeks come down by about 50 cents, and there should be more in the pipeline. And hopefully we will pass a bill that will lower prescription drug costs and maintain current levels of health care costs.”
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