White House Director of the National Economic Council Brian Deese tried to alter the definition of a recession during a discussion Monday on CNN.
Host Jon Berman asked Deese about the GDP report set to be released Friday and what that would “signify” should the data show a “second straight quarter of negative numbers.”
Deese said it was important to remember that the second quarter, which extended from April to June, saw 1.2 million jobs created despite supply chain issues and other negative economic activity.
“I think the bottom line is, if you look at the labor market, if you look at what consumers are spending, what businesses and households are investing, you continue to see this resilience,” Deese said. “But that’s no reason for complacency. We need to act. We need to act on things like prescription drugs and semiconductors right now.”
“It sounds like you’re anticipating what will be comments from some saying, two quarters of negative growth in a row, that’s a recession,” Berman said.
“Right. Certainly in terms of the technical definition it’s not a recession. The technical definition considers a much broader spectrum of data points. But in practical terms, what matters to the American people is whether they have a little economic breathing room, they have more job opportunities, their wages are going up — that has been Joe Biden’s focus since coming into office,” Deese said.
“[Biden] has had a view of the economy that we need to look to build from the bottom up and middle out. What that means is that typical, working class people in this country have had trouble affording things for years. [Biden] is focused on building a strong, durable, economic recovery,” Deese continued.
The White House Council of Economic Advisers said July 21 that two consecutive quarters of failing GDP is not indicative of a recession. (RELATED: Wall Street Is Freaking Out About One Major Recession Indicator)
“While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle,” the blog post said. “Instead, both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data – including the labor market, consumer and business spending, industrial production, and incomes.”
“Based on these data, it is unlikely that the decline in GDP in the first quarter of this year – even if followed by another GDP decline in the second quarter – indicates a recession,” the post continued.
Economist Julius Shiskin wrote in 1974 that two consecutive quarters of declining GDP is a good rule of thumb when defining a recession. The definition has become somewhat of a standard since, though the National Bureau of Economic Research uses several factors to determine whether the U.S. is in a recession.
The inflation rate hit 9.1% in June, marking the largest 12-month increase since November of 1981, and the Producer Price Index increased to 11.3%. To combat rising inflation, the Federal Reserve is reportedly poised to raise the federal funds rate by 0.75% at the end of July.