With Thursday’s report that the country’s GDP shrank by nearly 1% in the second quarter of 2022, the U.S. economy has entered into what some are calling a “technical” recession.
According to the Bureau of Economic Analysis, GDP fell 0.9% between the months of April and June. The decline was worse than the Dow Jones estimate of 0.3% growth, and marks the second consecutive quarter that the U.S. economy suffered a decrease in output.
The release of Thursday’s highly anticipated GDP report has further validated claims that the U.S. is currently in — or is about to enter — a recession, which has traditionally been defined as at least two consecutive quarters of falling economic output.
The report also came just one day after the Federal Reserve opted to again raise interest rates as part of their continuing battle to rein in inflation. The Fed’s 0.75% rate hike on Wednesday marks the fourth increase this year, and has contributed to worries of an even larger economic slowdown.
In a statement Wednesday, Federal Reserve Chair Jerome Powell attempted to ease Americans’ recession concerns, pointing to low unemployment and claiming “it doesn’t make sense” to say the economy is in a recession right now. Others, however, disagreed.
“A big part of leadership is to project confidence,” said Michael Arone, a strategist at State Street Global Advisors. “I have always taken Fed-speak with a bit of salt, but when it comes to a recession, as I told my team this morning, a ton of salt.”
President Joe Biden, for his part, echoed the Fed chair’s out-of-touch optimism, claiming that “it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation” and that the economy is on “the right path.”
“But even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure,” Biden said Thursday.
Polling shows that a majority of Americans disagree with the president’s assessment, however. As a Morning Consult/Politico poll taken earlier this month indicates, 65% of registered voters — including 78% of Republicans — believe the U.S. is already in a recession.