White House challenges the common definition of 'recession' — Here's what to know:
Thursday's report from the Bureau of Economic Analysis could show a second quarter in a row of negative GDP growth.But economists in the Biden White House recently claimed that that is not the official definition of a recession, nor an appropriate one.There is no official government definition of a recession.
The Bureau of Economic Analysis, which tracks the country’s GDP growth, doesn’t have its own definition of a recession. When contacted on Monday, a spokesperson pointed the Washington Examiner to the National Bureau of Economic Research’s definition. Similarly, a spokesperson for Congress’s Joint Economic Committee also said that the committee relies on that description.
Tara Sinclair, a professor at George Washington University, told the Washington Examiner that a recession is seen by economists as “broad-based economic decline” and said that decline wouldn’t just be marked by one indicator.It isn’t readily clear when or where the idea that two quarters of negative growth equals a recession originated, although in almost every case, the adage is true and it has, historically, been a reliable recession indicator.
Even as GDP has declined, jobs have increased — two factors typically seen as contradictory. The economy beat expectations and added 372,000 jobs in June, more than was expected. The unemployment rate also remained at 3.6% in June, matching the low level it was at right before the coronavirus pandemic struck.
The only period since World War II that there were two consecutive periods of negative GDP growth and no recession was in 1947, according to Sinclair. Hence why the rule of two consecutive quarters of negative GDP growth has been known to be so reliable.
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