Next Thursday the Bureau of Economic Analysis will release its first estimate of economic growth in the 2nd quarter. We estimate scant growth of 0.6%, although others are predicting the economy contracted.
Why it matters: There is heightened anticipation for the Q2 growth number because in the first quarter the economy contracted by 1.6%.
- The textbook definition of a recession is at least two consecutive quarters of negative growth. Should the economy shrink in Q2, we’d meet that definition.
Be smart: In reality, the definition of a recession is subjective, with factors other than GDP going into the analysis.
- Recessions are usually marked by increased joblessness and falling incomes. But we added jobs at a healthy clip in the second quarter and wages rose (albeit less than inflation). Is it really a recession if more people are working and incomes are rising?
- And remember, we are now in the 3rd quarter. Even if the economy contracted in the first half of the year, it could be growing already.
Bottom line: Ultimately whether we are technically in a recession, or have just ended one, doesn’t matter.
- What matters is consumers and businesses feel like we are in one because inflation is making their lives difficult. Consumer Sentiment is at its lowest level ever. The technical designation of this period won’t change that either way. The only thing that will is for prices to come down.
- Access my slide deck [PDF and PowerPoint] with up-to-date economic data and charts.
—Curtis Dubay, Chief Economist, U.S. Chamber of Commerce