Treasury Secretary Janet Yellen said Thursday that the U.S. economy doesn’t appear to be in a recession despite two straight quarters of negative gross domestic product (GDP).
During a Thursday press conference after the release of GDP data, Yellen said she did not see signs of an economy in decline, as job growth and consumer spending remained strong throughout the year.
“Most economists and most Americans have a similar definition of recession: substantial job losses and mass layoffs, businesses shutting down, private sector activity slowing considerably, family budgets under immense strain, and a broad-based weakening of our economy,” Yellen said.
“That is not what we’re seeing right now. When you look at the economy, job creation is continuing, household finances remain strong, consumers are spending and businesses are growing.”
The U.S. GDP fell at an annualized rate of 0.9 percent over the past three months, marking the second straight quarter of negative economic growth. While two negative quarters has long been a rule of thumb for figuring out when the U.S. is in recession, economists also consider job growth and other areas of the economy when making that judgment.
Yellen acknowledged that households still face “great stress” from high inflation, which reached an annual rate of 9.1 percent in June, according to Labor Department data. While national measures of household spending and wealth remain sturdy, high inflation has taken a serious toll on low- and middle-income families, which are struggling to keep up with rising food and fuel prices.
“We simply haven’t seen anything like this since the 1970s,” Yellen said.
“What’s happening to food prices and energy prices and rent and other prices in the economy is making families very concerned about their household budgets,” she continued. “This is pressure that’s real, that we recognize, and it’s the president’s top priority to bring inflation down.”
Even so, Yellen said the slowdown in GDP showed the U.S. transitioning to “more steady, sustainable growth” after the economy grew rapidly through 2021.
The Federal Reserve has ramped interest rates aggressively this year to slow the economy and curb inflation, but the U.S. still added 1.1 million jobs during the second quarter. Consumer spending has also continued to rise throughout the decline in GDP, and wages rose 5.1 percent last month alone.
While the administration’s $1.9 trillion March 2021 stimulus bill likely played a role in fueling high inflation, economists say it is only one of many factors — most of which are related to the COVID-19 pandemic — that have caused high price growth around the world.
Republican lawmakers have nonetheless accused Biden of driving the economy into a recession.
There is no official threshold set by the federal government to determine when the U.S. is in recession. Instead, economists turn to the National Bureau of Economic Research (NBER), a think tank not affiliated with the government, to make that call.
The White House has insisted for days the U.S. is not in a recession simply because of two straight quarters of decline, citing NBER’s standards for making the call. Yellen, however, said the administration should avoid “a semantic battle” over the economy and focus on how to fix it.
“We have a slowing economy. We have a whole variety of risks to the outlook that I’ve tried to enumerate, but we have great strengths in the economy too,” Yellen said.
“We shouldn’t just get involved in the semantics,” she added. ”Let’s talk about what’s going on.”