By Jim Geraghty
Monday, July 25, 2022
Politico’s Ben White characterizes this week as a “Category 5
economic storm,” but I think the dominant theme will be,
“It’s not a recession, we swear!”
As much as economy-watchers will be
studying the Consumer Confidence Index numbers on Tuesday and the Federal
Reserve meeting and decision on
interest rates Wednesday, the biggest deal will be
the numbers for second-quarter economic growth, announced at 8:30 a.m. Eastern
Thursday morning. We don’t know what the second-quarter economic numbers are
going to be, but they’re probably not going to be good. The Atlanta Fed thinks
it will show that the U.S. GDP shrank 1.6
percent in the last quarter. The previous
quarter was a decline of 1.6
percent as well — so if the Atlanta Fed projection
is correct, Thursday will bring news that the U.S. is now in a recession, at
least by the traditional definition. (Even if it doesn’t, and it shows GDP
growth at 0.0 or slightly higher, the U.S. is still in lousy near-recessionary
conditions.)
Biden and his team will argue that,
despite the numbers, the U.S. isn’t really in a recession. In fact, White
writes that if Republicans declare we’re in recession, “It will not be true. At
least not yet. But President Joe Biden and Democratic candidates across the
country will face a daunting and possibly impossible challenge explaining to
people why it’s not true.”
On Meet
the Press yesterday, Yellin had the unenviable
task of convincing Americans that even though it may look like a recession,
sound like a recession, and feel like a recession, it’s not really a recession:
SEC. JANET
YELLEN: I do want to emphasize: What a recession really means is a broad-based
contraction in the economy. And even if that [second-quarter-GDP-growth] 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 —
CHUCK
TODD: I understand that, but you’re splitting hairs. I mean, if the technical
definition is two quarters of contraction, you’re saying that’s not a
recession?
YELLEN:
That’s not the tech —
TODD: No?
YELLEN:
That’s not the technical definition. There’s an organization called the
National Bureau of Economic Research that looks at a broad range of data in
deciding whether or not there is a recession. And most of the data that they
look at right now continues to be strong. I would be amazed if the NBER would
declare this period to be a recession, even if it happens to have two quarters
of negative growth. We’ve got a very strong labor market. When you’re creating
almost 400,000 jobs a month, that is not a recession.
The National Bureau of Economic Research
isn’t exactly speedy about these declarations. Back in December 2008, it announced
that the U.S. was in a recession . . . that had begun almost one year earlier
in January 2008.
It is indeed true that it’s odd to see an
economic recession when unemployment is at just 3.6 percent. The other
counterargument that the Biden administration keeps trotting out is that
companies are hiring, which is usually the opposite of what happens in a
recession. As of May, the U.S. had
11.3 million unfilled jobs.
But an unfilled job doesn’t actually
produce anything — other than perhaps help-wanted ads — which means that those
11.3 million openings aren’t contributing to the GDP. The Biden administration
is pointing to the near-record number of job openings as a sign of economic
strength. But all those empty office cubicles, empty spots on the assembly line,
unanswered calls, and unfilled wait-staff shifts feel a lot more like a sign of
economic weakness. Peggy Noonan
offered a vivid description in her column this weekend:
Retailers
big and small struggle to find and retain employees. Beaches and pools can’t
find lifeguards. Police forces can’t find young men and women to apply. The
U.S. Army can’t find recruits. Doctors offices strain to fill a job when
somebody leaves. Airlines are so short-staffed there’s no one to help you find
luggage that’s been lost for two weeks. There’s no one to keep it
from being lost. The other night a Midwestern city official told CNN, of the
struggle to hire cops, “It’s like the American workforce vanished.”
There are still a lot of, “Please be
patient, we are understaffed” signs in the front of restaurants around the
country, a lot of retail stores with only one or two registers open, and a lot
of pharmacies with only one pharmacist trying to manage the phone and the line
of customers in front of her. Those aren’t signs of a thriving economy.
The U.S.
Chamber of Commerce notes that:
The U.S.
has 3.25 million fewer Americans working today compared to February of 2020. .
. . Right now, the latest data shows that we have over 11 million job openings
in the U.S. — but only 6 million unemployed workers. We have a lot of jobs, but
not enough workers to fill them. If every unemployed person in the country
found a job, we would still have 5.4 million open jobs.
If the economy were as strong and healthy
as the Biden team and congressional Democrats want it to be, there would be
Americans working in those jobs.
The reason it will be so difficult for
Biden to explain that this isn’t really a recession is because in the American
public’s mind, a recession is a de facto synonym for “economic bad times.” With
inflation at 9.1 percent, Americans are feeling an intense financial squeeze
because everything is more expensive now. The price hikes aren’t gradual;
they’re sudden and noticeable. And these aren’t price hikes that a person
notices for once-in-a-while purchases, like a new home purchase or a new car
purchase. These are noticeable price hikes in everything they buy, particularly
groceries and gasoline.
There’s a curious trend in economic
journalism lately, contending that Americans are just too pessimistic, and that
most Americans are doing much better than they are willing to admit.
This New
York Times write-up of a survey in mid July is a good example: “Just 10 percent of registered voters say the U.S. economy is ‘good’
or ‘excellent,’ according to a New York Times/Siena College poll — a remarkable
degree of pessimism at a time when wages are rising and the unemployment rate
is near a 50-year low.”
But here’s a
feature story in the Times on the impact of
inflation from just a few weeks earlier:
In May
2021, the average price
of a dozen large eggs was
$1.60. A year later, it was $2.80 — an increase of 75 percent. Ground beef is
up 13 percent per pound. A gallon of whole milk costs one-fifth more. Overall, grocery prices were 12 percent higher last month than they were a year earlier,
according to the Bureau of
Labor Statistics. That was the largest year-over-year
increase since 1979.
At the
same time, the average driver was paying nearly $275 a month at the pump, up
from $167 in June 2021, when a gallon of gas was $3.07, according to Kelley Blue
Book’s calculations. Rents, too, are escalating. The median monthly
rent was nearly $1,850 in May, according
to Realtor.com, up 26 percent from 2019, before the pandemic.
This morning, the Wall Street
Journal serves up an article on upper-middle-class Americans who are
watching their economic gains of 2020 and 2021 erode in 2022. The article notes
that, “Upper-middle-class
households are defined here as those earning between $75,301 and $127,300 a
year.” (In parts of the country with high
costs of living, that doesn’t seem all that upper!) Lots of people,
particularly on the left, are likely to scoff that these Americans are
sufficiently well-off that they need no sympathy — which illuminates just how
conditional their much-touted empathy is. Upper-middle-class families must pay
their mortgages, grocery bills, and gas bills, and for college educations and
retirement, too.
Many economic writers — who I suspect are
sympathetic to the administration — keep asking, “Why do the American people
keep demonstrating this remarkable degree of pessimism?” And the American
people keep answering, “Because everything is so flippin’ expensive these
days!”
Between now and the midterms, Yellin,
Biden, and the rest of the Democrats will be trying to convince Americans that
they’re more prosperous than they feel. I suspect you would have an easier time
convincing Americans that they’re taller than they feel.
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