Is The U.S Economy Entering a Recession?

Dayana Sabatin
Photo by Markus Winkler

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.

Comments / 2

Published by

Sharing news about politics, the economy and other local stories.

Santa Monica, CA

More from Dayana Sabatin

Comments / 0