White House economic adviser Jared Bernstein said recently that Americans who think the country has fallen into a recession are basically confused about the source of their economic pain, while doubling down on the Biden administration’s view that the U.S. economy isn’t, in fact, in a contraction, despite two back-to-back quarterly negative GDP prints.
Jared Bernstein, who’s a member of the White House Council of Economic Advisers, told CNN’s “Situation Room” program last week that while it’s understandable that most Americans think the country is in a recession, the reason they feel that way is because of high inflation rather than economic fundamentals or a shrinking economy.
“Most people are thinking about inflation. They’re thinking about the pressures on their family budgets. And it’s completely understandable that they would be,” Bernstein said, adding that inflation in the United States is running unacceptably high.
According to the latest Consumer Price Index (CPI) data, U.S. inflation soared to 9.1 percent in annual terms in June, a fresh 40-year high.
‘Makes Perfect Sense’
In the interview, Bernstein was asked to comment on a CNN poll conducted by SSRS (pdf), which revealed that 64 percent of Americans believe the economy is now in a recession.
Bernstein told the outlet that it’s reasonable that most Americans feel the country’s in a recession because they’re experiencing an inflation-driven cost-of-living crunch.
“I say that that makes perfect sense to me that people would answer a poll with that kind of response. And the reason is because if you actually look at how the group that designates recessions … it’s a fairly technical set of analyses that we’ve been talking about throughout the week,” Bernstein said, adding that most people are actually thinking about inflation when responding to questions about recession.
America’s economy contracted by an annualized rate of 1.6 percent in the first quarter and by 0.9 percent in the second quarter.
Two negative back-to-back quarterly GDP prints are a common, practical—though not official—definition for a recession.
Formally, recessions in the United States are declared by a committee of economists at the National Bureau of Economic Research (NBER), who use a broader definition than the two-quarter rule that considers a range of indicators—including ones relating to the labor market—which has remained on a relatively solid footing.
The Biden administration has seized on the NBER’s criteria for declaring a downturn, insisting that the economy isn’t in a recession, chiefly citing labor market strength—though there are signs that it may be cooling.
A growing number of U.S. corporations, for example, have announced hiring freezes or layoffs, while the number of Americans filing for unemployment insurance climbed by 6,000, to 260,000 last week, according to the Department of Labor (pdf). Continuing claims, which run a week behind initial filings, rose by 48,000, to 1.42 million. And the number of job openings in June fell by more than 600,000 in June, the biggest drop since April 2020.
By contrast, the latest jobs report showed that U.S. employers added 528,000 jobs in July, sharply higher than market estimates, while the unemployment rate edged down, to 3.5 percent.
Biden Downplaying Recession Risk?
In the interview, Bernstein was asked whether President Joe Biden has been downplaying the recessionary red flag in the form of two negative back-to-back GDP prints.
“Is it a mistake, Jared, for him to be downplaying the economic risks right now,? CNN’s Wolf Blitzer asked Bernstein.
Biden is “absolutely not downplaying” the risk, Bernstein replied, insisting that the president has instead been “consistently up-playing it.”
Bernstein pointed to Biden’s remarks that inflation is “unacceptably high” and that bringing down soaring prices is his “number-one priority.”
He added that the backdrop to Biden’s insistence that the economy hasn’t dropped into a recession is a strong labor market, with the economy adding around 375,000 jobs per month on average over the past three quarters and “very low unemployment.”
“That backdrop is a really important buffer against these unacceptably high prices but nobody—nobody here in the White House—is downplaying it,” he added.
Bernstein also said that American families expressing concern about recession and high prices “often have pretty decent balance sheets” and are “out there spending at a decent clip,” while pointing out that real inflation-adjusted consumer spending was in positive territory for both of the past two quarters where GDP came in negative.
His remarks dovetail with recent statements made by Treasury Secretary Janet Yellen, who said that that “most economists and most Americans” define a recession as a “broad-based weakening” of the U.S. economy that includes businesses shuttering in significant numbers and mass layoffs.
“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,” Yellen said.
A number of experts and economists disagree with the White House view that the U.S. economy isn’t in a recession.
‘We’re in a Recession. Full Stop’
When Jim Bianco, founder of Bianco Research, was asked whether he accepts the Biden administration’s insistence that the country hasn’t yet slipped into a recession, he told the Real Vision Finance program in a recent interview that while it may be “shallow,” it’s a recession.
“Let me try and be clear here. Yes, we’re in a recession. Full stop, question over—a recession,” Bianco said.
The expert added that it may be reasonable to call the recession “shallow,” though he warned that the downturn could soon get ugly.