GDP report shows US economy has shrunk further

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Treasury Secretary Janet L. Yellen pointed to a strong labor market, strong business and consumer spending, and strong industrial production as signs of the economy’s health.CreditCredit…Win Mcnamee/Getty Images

President Biden and Treasury Secretary Janet L. Yellen on Thursday dismissed questions about whether the U.S. economy was already in recession, pointing to labor market strength and other metrics as signs of its health.

Ms Yellen, speaking at a Treasury Department press conference, said she did not believe the United States was in a recession, saying the labor market and household balance sheets remained strong despite the slowdown in growth.

Mr Biden, speaking at the White House, said that although the economy was slowing, “we are also seeing signs of economic progress”. The president pointed to comments Wednesday from Jerome H. Powell, the chairman of the Federal Reserve, who said he did not believe the United States was currently in a recession.

“And the reason for that is that there are just too many sectors of the economy that are working too well,” Powell said.

The comments came as disappointing economic data raised fears that the economy could soon experience a slowdown, if it hasn’t already. The Fed made another big interest rate hike on Wednesday as it tried to rein in inflation, which is expected to further cool the economy.

Commerce Department data released Thursday showed gross domestic product, adjusted for inflation, fell 0.2% in the second quarter, equivalent to an annual rate of decline of 0.9%.

The 0.2% drop followed a 0.4% contraction in the first three months of the year, meaning that by a common but unofficial definition, the US economy barely entered a recession. two years after its last release.

“In the context of today’s report, it’s important to look beyond the headline figure to understand what’s going on,” Ms Yellen said. “Overall, with a slowdown in private demand, this report points to an economy transitioning to more stable and sustainable growth.”

Ms Yellen said recessions were usually marked by substantial job losses and strained family budgets. She argued that business and consumer spending and industrial production remain strong.

The Treasury Secretary added that the global economy faces many risks that could affect the US economic outlook, pointing to Russia’s war in Ukraine, lockdowns in China and supply chain disruptions. .

Ms. Yellen acknowledged that inflation remained too high and that getting it under control was the Biden administration’s top priority.

“We simply haven’t seen anything like this since the 1970s, and seeing what happens to food prices, energy prices, rents and other prices in the economy makes families very concerned about their family budget,” Ms Yellen said.

She also expressed support for the climate and tax bill that Senate Democrats unveiled on Wednesday night, suggesting it would help dampen inflation. The bill aims to reduce prescription drug costs and provide expanded tax credits for electric vehicles while raising taxes on big business and strengthening tax code enforcement.

“These efforts are long overdue, and Congress should pass them immediately,” Yellen said.

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