Posted on 07/28/2022 6:50:24 AM PDT by Red Badger
As the Federal Reserve announces a rate change, traders work and watch at the New York Stock Exchange in New York, Wednesday, July 27, 2022. Stocks on Wall Street are solidly higher in afternoon trading Wednesday after the Federal Reserve raised its key interest rate by a widely expected three-quarters of a point as the central bank ratchets up its campaign to quell surging inflation. (AP Photo/Seth Wenig)
The U.S. economy slumped 0.9% in the second quarter, the Bureau of Economic Analysis reported on Thursday, in one of the most widely anticipated economic releases of the year.
“The decrease in real GDP (gross domestic product) reflected decreases in private inventory investment, residential fixed investment, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by increases in exports and personal consumption expenditures (PCE). Imports, which are a subtraction in the calculation of GDP, increased,” the report said.
The decline makes it two quarters in a row of negative growth, following a 1.6% drop in the first quarter, and the news will lead to pronouncements that the U.S. has now slipped into a recession. However, while two quarters of contraction in economic output is often used as a measure of a recession, the official determination will not be made for some time and will take into account a host of other economic data.
That won’t matter to the general public or to politicians who are eager to tag President Joe Biden with having presided over the highest inflation since the 1980s and now a recession.
White House officials spent a good part of the week downplaying the GDP report, with Biden dismissing the idea that the economy was already in recession. On Thursday, Federal Reserve Chairman Jerome Powell said, “I do not think the U.S. is currently in a recession.”
Powell cited the continued strength of the labor market and mentioned that “aggregate demand appears to remain strong.”
While it is not as hot as it once was, the labor market still averaged 375,000 new jobs a month over the past quarter.
"The current labor market does not reflect recessionary patterns,” said Rucha Vankudre, senior economist at Lightcast, a data analytics firm focused on the job market.
But it is the policies of the Fed that are seen as pushing the economy into a recession, through an aggressive tightening of monetary policy aimed at curbing inflation. The central bank also is letting its large balance sheet run down. Economists generally believe the odds of a recession within the next 12 months are better than even money.
“The Fed delivered today what had been broadly expected, while reiterating their commitment to doing whatever is needed to bring inflation back under control,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
“Can policymakers do so without also tipping the economy into recession?” Baird added, following the Fed’s announcement of a 75 basis point interest rate hike on Wednesday. “Some have suggested that ship has already sailed and that a recession is already underway. The ambiguity present in a range of indicators makes that a difficult call.”
To some degree, it is a matter of semantics. Consumers have turned sour, the housing market is cooling rapidly, and even the labor market has softened in recent weeks. Inflation has been the primary concern for most Americans, although the recent drop in gasoline prices and some other goods gives some hope on that front.
“Our qualitative assessment of recession risk out 12 months is 45% (within a wider range of 40%-50%), and we see risks increasing as we head into 2023,” said Beth Ann Bovino, managing director and chief economist for the U.S. and Canada at S&P Global Ratings.
Separately, the number of Americans filing first-time claims for unemployment benefits fell slightly last week to 256,000 from the revised 261,000 previously.
The four-week moving average was 249,250, an increase of 6,250 from the prior period.
“Through July, we’ve seen very slight declines in workforce activity in 4 of the last 5 months, leading to a slowing in new job creation,” said Dave Gilbertson, vice president at human resources company UKG.
“UKG data is suggesting this trend of gradually declining new job creation continued in July, which we expect will be validated in next week’s jobs report,” Gilbertson added. “With the notable exception of health care jobs, most industries are on a path to have a ‘soft landing’ in the labor market.”
Notice they are suddenly redefining recession away from the traditional two quarters of negative growth to cover for Joe.
That definition only matters for Republicans /s
“Who controls the past controls the future. Who controls the present controls the past.”
― George Orwell, 1984
“But if thought corrupts language, language can also corrupt thought.”
― George Orwell, 1984
“It’s a beautiful thing, the destruction of words.”
― George Orwell, 1984
“It appeared that there had even been demonstrations to thank Big Brother for raising the chocolate ration to twenty grams a week. And only yesterday […] it had been announced that the ration was to be reduced to twenty grams a week. Was it possible that they could swallow that, after only twenty-four hours? Yes, they swallowed it. [...] The eyeless crature at the other table swallowed it fanatically. passionately, with a furious desire to track down, denounce, and vaporize anyone who should suggest that last week the ration had been thirty grams. Syme, too-in some more double complex way, involving doublethink-Syme, swallow it. Was he, then, alone in the possession of a memory?”
― Orwell George, 1984
No. They are not recession “fears”. This IS a recession right now. By Definition.
I refuse to accept their “new” definition by which the same standard that was always called a recession in the past somehow doesn’t apply this time. Two negative quarters. Recession.
Wal-mart is talking selling milk by the quart now. People can’t afford larger.
And yet the stock markets are up today (and I suspect the bond mutual funds will get whacked again). We are so being played on our investments.
My life savings is shrinking every day.....................
And when Trump is in power.
You know how they’d treat the news then.
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