Is The U.S Economy Entering a Recession?

Dayana Sabatin

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The most recent figures from the U.S. Bureau of Economic Analysis have shown that the American economy has now experienced two consecutive quarters of negative real (inflation-adjusted) gross domestic product growth.

According to the dictionary, the literal definition of a recession is: "A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."

However, economists are saying that any official declaration of a U.S. recession has to come instead from the National Bureau of Economic Research (NBER), which analyzes various monthly macroeconomic indicators observed over extended periods. Due to the intensity of this debate, a person might think the popular and official assessments contradict one another, but that isn't it.

Since 1948, BEA data on real GDP has revealed 10 periods with 2 or more consecutive quarters of negative growth, in 1949, 1954, 1958, 1970, 1975, 1980, 1982, 1991, 2009, and 2020; all of these correspond to the NBER's eventual declaration of a recession.

Essentially, the "two-consecutive-quarters" metric hasn't had a false positives since 1948. If you take the eventual NBER verdict as truth, you have to also accept that two consecutive quarters of negative real GDP growth have forecasted a recession for the past 74 years.

Additionally, a clear advantage of the two-consecutive-quarter decline is that it's timely and doesn't require waiting for the NBER's announcement that a recession has begun.

What you need to keep in mind is that with the announcement of a two-quarter GDP decline is that we can be confident that the U.S. economy entered a recession early in 2022.

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