Shrinking away from 'recession'

Economic data due out this week－headlined by a report on GDP－is likely to fuel anxiety on the state of the US economy and raise the political temperature. Hitting first will be an expected rise in interest rates.

Offering more hope than reassurance, United States President Joe Biden said on Monday: "God willing, I don't think we're going to see a recession."

After the Federal Reserve meets on Wednesday, with expectations for a further tightening in monetary policy, the report on economic growth on Thursday will show whether the US managed to avert another quarter of negative growth. A recession is typically called on successive quarters of negative expansion. On Friday comes the release of the personal consumption expenditure index, which the Fed uses as its key inflation guide.

Brian Deese, director of the National Economic Council, said on Monday that if this week's GDP report from the Commerce Department shows a second consecutive negative quarter, it does not mean that the US is in a recession.

Turning to an argument that the White House used regarding an inflation report earlier this month, Deese said the second-quarter data will be "inherently backward-looking", and pointed to the jobs created in that time frame.

"Never in the history of our country have we had a recession where the economy was creating jobs, period, let alone creating 400,000 jobs," Deese told the CNN broadcaster.

Recessions have historically been declared after two quarters of negative GDP. The US economy retracted by 1.6 percent in the first quarter of this year.

In a blog post on July 21, the White House Council of Economic Advisers said that two straight quarters of falling GDP doesn't mean the country is in a recession.

"What is a recession? While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle," the blog post states.

"Recession probabilities are never zero, but trends in the data through the first half of this year used to determine a recession are not indicating a downturn."

The effort to reframe the definition of recession brought out the political critics of the Biden administration.

"The Biden Administration is trying to redefine what a 'recession' is to cover up the President's failing policies," US Representative Claudia Tenney, a New York Republican, wrote on Twitter. "But no matter how hard he tries, Joe Biden cannot change reality!"

'Gaslighting' people

US Representative Mary Miller, an Illinois Republican, wrote on Twitter: "If the press allows Biden to change the definition of 'recession' to gaslight the American people, then we know the media is irredeemably corrupt and partisan. A major test for the so-called 'fact checkers!'"

In an interview on Sunday on the NBC network, Treasury Secretary Janet Yellen said of the pending second-quarter GDP results: "Even if that number is negative, we are not in a recession now. And I would, you know, warn that we should be not characterizing that as a recession."

Yellen received some support for her argument in an article released on Bloomberg on Monday. The article said: "The colloquial definition is a sort of shorthand: two consecutive quarters of negative growth. But the formal definition in the US context comes from the National Bureau of Economic Research, which defines a recession as a 'significant decline in economic activity that is spread across the economy and that lasts more than a few months'."

When the Federal Reserve concludes its policy meeting on Wednesday, it is expected to sign off on a second consecutive rise of 0.75 percentage point, elevating its key interest rate to a range of 2.25 percent to 2.5 percent.

It would be the fourth rate increase since March. Since then, with inflation setting fresh four-decade highs, the central bank has tightened credit more aggressively.

"Until there's very clear evidence of the labor market beginning to meaningfully deteriorate, the No 1 focus for the Fed must be inflation," said Matthew Luzzetti, chief US economist at Deutsche Bank.

US Senator Elizabeth Warren, a Massachusetts Democrat, warned against the potential recessionary impact of the Fed continuing to raise rates.

"Inflation is a global phenomenon inflicting significant financial pain on families everywhere. Rising costs are an urgent problem, and interest rates play a key role in maintaining price stability," Warren wrote in an opinion article in The Wall Street Journal on Sunday.

"But urgency is no excuse for doubling down on a dangerous treatment. As with any illness, the right medicine starts with the right diagnosis. Unfortunately, the Fed has seized on aggressive rate hikes－a big dose of the only medicine at its disposal－even though they are largely ineffective against many of the underlying causes of this inflationary spike.

"Low unemployment and high inflation are painful, but a Fed-manufactured recession that puts millions of Americans out of work without addressing high prices would be far worse."

Agencies contributed to this story.