The U.S.' economic landscape remains far from picturesque, with a housing market downturn, inflation spikes and consumer price increases darkening the landscape.
Economists, investors and brokers already say that America is heading for, or may already be in, a recession.
Despite early signs of recovery and optimistic forecasts in 2021, and an apparent determination to focus on the promising aspects of the country's economic health, the Biden administration is now seeing warning flashes of further and prolonged pain.
However, some have suggested that rather than a more critical outlook, the White House is instead "shifting the goalposts" in its economic analysis.
The Claim
A Reddit post, published on 24 July, 2022, claims that The White House altered the definition of a recession on its website "conveniently after GDP numbers were released."
This was also picked up by Fox News White House correspondent Jacqui Heinrich who posted it on her Twitter, eliciting thousands of engagements.
— Jacqui Heinrich (@JacquiHeinrich) July 24, 2022Bracing for impact: Even if Thursday's GDP report shows a second consecutive quarter of negative growth, you won't hear the Biden admin using the R-word.
The Council of Economic Advisers is redefining what a recession is...🤔https://t.co/HHBYJKqP5V pic.twitter.com/gecR93vPPj
(Video) Facebook censors top economist for defining recession
The Facts
Before addressing the specific accusations fired at the White House, it's worth quickly noting the most widely accepted definition of a recession: a decline across two consecutive quarters in gross domestic product (GDP) and economic activity. What metrics that activity is defined by, and what scale of decline is required is less clear, however.
Before dealing with some of the more substantive questions that the claims on social media suggest, there are a couple of finer points to address.
First, there's a minor inaccuracy in the Reddit post. It claims the White House published this article after GDP numbers were released. GDP numbers will actually be released this Thursday, July 28, 2022.
Second, both the Reddit and Twitter posts have cropped out the header of the purported White House "definition."
The text, published on social media, is from a July 21, 2022 blog post, titled "How Do Economists Determine Whether the Economy Is in a Recession?"
By only including the first two paragraphs of this blog post, alongside the White House logo and website URL, the captures on social media may imply the content came from a more authoritative or neutral source.
This is not the case; it is an editorial piece that is labeled as such. The subheadings "Written Materials" and "Blog" include hyperlinks, which when selected present a chronological list of press releases and other White House analysis, which do not purpot to be a dictionary of accepted government terms and metrics.
Furthermore, the White House website doesn't have a dictionary or catalog of all political terminology and jargon it uses (that is the case for other governments, such as those of the UK and Canada, too).
It serves as the online landing page for the incumbent presidential administration and 1600 Pennsylvania Avenue.
As the website of the president, it is not a faultless, non-partisan archive of information either. The Trump presidency demonstrated how it could be used to make debatable claims or perpetuate mistruths, such as that the border wall between Mexico and the U.S. had been completed.
There are politically expedient reasons for a government to withhold recession calls, just as its rivals might herald one prematurely.
As the pressures caused by supply chain disruptions post-Covid and the conflict in Ukraine have demonstrated, there are global influences beyond the reach of domestic governments that can provide leverage to excuse withering economic performance as well.
Similarly, fears of a recession can be kicked around to denigrate a political rival.
Take for example Donald Trump's (who oversaw the U.S.'s deepest recession since the Great Depression) shifting view on the subject, from predicting a "massive recession" in pre-election 2016, to denying the possibility in 2019, denying it again in April 2020, to warning in July 2022 that the U.S. economy could reach levels of Great Depression.
For its part, the Biden administration has publicly attempted to highlight its economic achievements and downplay the prospects of a recession. On the same day the blog post shared on social media was published, wh.gov also released a transcript of an interview with treasury secretary Janet Yellen, in which she claimed that there was "a broad range of data" to show "this is not an economy that's in recession."
Much of what Yellen says echoes the themes of the White House blog post.
"There is 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," she said.
"And most of the data that they look at right now continues to be strong. I would be amazed if they would declare this period to be a recession, even if it happens to have two quarters of negative growth.
"We have a very strong labor market. When you are creating almost 400,000 jobs a month, that is not a recession."
This brings us back to the main question of what defines a recession (typically understood as a contraction of gross domestic product across two consecutive quarters). The White House blog post merely posits an argument that a recession should be classified using more detailed analysis and a wider range of indicators.
The blog states how the government uses The National Bureau of Economic Research (NBER) Business Cycle Dating Committee as its "official recession scorekeeper." This committee defines it a recession as "a significant decline in economic activity that is spread across the economy and that lasts more than a few months."
The White House statement goes on to say the variables the NBER considers include "real personal income minus government transfers, employment, various forms of real consumer spending, and industrial production."
"Notably, there are no fixed rules or thresholds that trigger a determination of decline, although the committee does note that in recent decades, they have given more weight to real personal income less transfers and payroll employment."
While the White House blog argues that growth in consumer spending, fixed investment and payroll employment may well strengthen its case that the U.S. may not yet face a recession, it also concedes that "Recession probabilities are never zero," something the posts on social media neglect to mention.
Independent organizations such International Monetary Fund, the UK's Office for National Statistics and the World Economic Forum have previously commented in a similar vein, arguing the definitions are too narrow and that wider measures of economic activity should be considered.
To explore this point further, Newsweek spoke to a number of economists for their view.
David Blanchflower, professor of economics at Dartmouth and a former member of the Bank of England's Monetary Policy Committee, told Newsweek that while the rule of thumb was recession was defined by two successive quarters of negative GDP growth, research due to be published suggests that previous positive growth, followed by successive negative growth, may predict a recession much earlier than other models.
As it stands, the U.S. has experienced sluggish growth from Q3 2021 to Q1 2022, with negative growth in Q1.
"The issue also is that the last two recessions, including the Great Recession (2007-2009), had a negative quarter followed by a positive one followed by several more negatives," he said.
"I actually do think this time around we are in recession, as the first two quarters of 2022 will be negative. The labor market has changed and lags as it has in Europe where the two negative quarter rule works eventually, as there are revisions at downturns."
Laurence Ball, a professor of economics at Johns Hopkins University and a consultant for the International Monetary Fund, argued that while its a complex topic and that there were shortcomings to the NBER's method, he didn't think that "any reasonable definition of a recession would indicate that a recession should be declared for the U.S. today."
"That said, there is a risk of a recession going forward, depending on how much the Fed interest rate increases slow the economy," he added.
Other experts have chimed in, ahead of Thursday's GDP figures, such as Larry Summers, former economic adviser to ex-President Barack Obama, who told Politico's Playbook Deep Dive podcast, that a high inflation rate and low unemployment rate was nearly certain to trigger a recession.
"We have had soft landings because we tightened at moments when the inflation rate was low and the unemployment rate was high," said Summers.
"We have not had soft landings for moments when the unemployment was below 4 [percent] and the inflation was well above 4 [percent] ... Never happened in the United States going back 60, 70 years."
Recent polling also found that in July 2022, 58 percent of Americans thought the country was in recession, up from 53 percent in June.
There is no question that inflation rises, price increases, housing downturn and plunging financial markets could champion an argument that a recession is coming.
Moreover, statements made by the Biden administration, including that high gas prices are the sole result of "Putin price hikes," or its now badly-aged predictions that inflation would quickly subside, indicate it may not have either the clearest or most reliable view of the economy.
Nonetheless, regardless of one's views on the current situation, it is a far cry to say the White House has reinvented the definition of recession, when there is no consensus among experts and authorities about what exactly a recession constitutes, and whether the U.S. is in one already.
Newsweek has contacted The White House and Fox News for comment.
The Ruling
False.
The White House website did not change its definition of what a recession is, as it never had one to begin with. As a web presence of the incumbent president, it regularly features information that favors the current administration. The web page referred to on social media was a blog arguing how the popular definition of recession is too narrow. It also states that the U.S. relies on the non-partisan National Bureau of Economic Research as its "official recession scorekeeper." The social media posts misleadingly crop out the headline and other information to misrepresent the nature —and exaggerate the significance—of an editorial piece.
FACT CHECK BY Newsweek's Fact Check team
FAQs
What is the true definition of a recession? ›
A recession can be defined as a sustained period of weak or negative growth in real GDP (output) that is accompanied by a significant rise in the unemployment rate. Many other indicators of economic activity are also weak during a recession.
Is 2022 a recession? ›According to the general definition—two consecutive quarters of negative gross domestic product (GDP)—the U.S. entered a recession in the summer of 2022. The organization that defines U.S. business cycles, the National Bureau of Economic Research (NBER), takes a different view.
Is the US currently in a recession? ›The trough month was April 2020, which NBER considers inclusive, so the recession started at the beginning of March 2020 and ended at the end of April 2020, making it a 2-month recession.
What are 3 things that are happening during a recession? ›In basic terms, a recession is when the economy's performance decreases for an extended period of several months, marked by GDP contraction, higher unemployment rates and lower consumer spending. During a recession, people may experience significant impacts on their daily lives.
When was the last recession in the US? ›December 2007–June 2009. Lasting from December 2007 to June 2009, this economic downturn was the longest since World War II. The Great Recession began in December 2007 and ended in June 2009, which makes it the longest recession since World War II.
How does the Federal Reserve define a recession? ›The NBER measures peak-to-trough declines in economic activity through a number of macroeconomic variables. While the popular definition of a recession is “two consecutive quarters of negative real gross domestic product (GDP) growth,” the NBER does not strictly abide by this designation (note 2).
Is a housing recession coming? ›The U.S. housing market recession to carry over into 2023
Year-over-year change in private residential fixed investment GDP (i.e. U.S. housing activity). On a year-over-year basis, the ongoing housing downturn has seen new home sales and existing home sales fall by 29.6% and 20.2%.
A recession is now likely in 2023. Here's what could trigger a sharp downturn in the economy. The economy appears to be on solid footing, with strong job growth. But warnings signs are mounting.
How many years does a recession last? ›The good news is that recessions generally haven't lasted very long. Our analysis of 11 cycles since 1950 shows that recessions have persisted between two and 18 months, with the average spanning about 10 months. For those directly affected by job loss or business closures, that can feel like an eternity.
Who defines a US recession? ›The bureau defines a recession as a “significant decline in economic activity that is spread across the economy and lasts more than a few months.” Its business cycle dating committee, which is composed of eight economics professors, meets to determine when recessions begin and end.
What is causing inflation 2022? ›
In early 2021, a worldwide increase in inflation began to occur. It has been attributed to various causes, including pandemic-related fiscal and monetary stimulus, supply shortages (including chip shortages and energy shortages), price gouging and as of 2022, the Russian invasion of Ukraine.
Who determines if the US is in a recession? ›The NBER's Business Cycle Dating Committee takes a cautious approach to its job. It has typically taken the committee four to 21 months to declare recession.
What are 5 causes of a recession? ›- Loss of Confidence in Investment and the Economy. Loss of confidence prompts consumers to stop buying and move into defensive mode. ...
- High Interest Rates. ...
- A Stock Market Crash. ...
- Falling Housing Prices and Sales. ...
- Manufacturing Orders Slow Down. ...
- Deregulation. ...
- Poor Management. ...
- Wage-Price Controls.
The baseline forecast is for growth to slow from 6.1 percent last year to 3.2 percent in 2022, 0.4 percentage point lower than in the April 2022 World Economic Outlook.
What triggers a recession? ›A recession is caused by a chain of events in the economy, such as disruptions to the supply chain, a financial crisis, or a world event. A recession can also be triggered after an inflationary period.
How many times has the US been in a recession? ›Starting with an eight-month slump in 1945, the U.S. economy has weathered 13 different recessions since World War II.
Does inflation Cause recession? ›High inflation rates can indicate an impending recession, as businesses react to higher costs by reducing production and increasing prices. And if the Federal Reserve takes action in the form of more rate hikes to curb rising inflation, there's a risk that the move could help trigger a recession.
What was the worst recession in US history? ›Before the COVID-19 recession began in March 2020, no post-World War II era had come anywhere near the depth of the Great Depression, which lasted from 1929 until 1941 (which included a bull market between 1933 and 1937) and was caused by the 1929 crash of the stock market and other factors.
How likely is a recession in 2022? ›The sharp contrast between the index's average recession path and the six-month path in 2022 suggests that a recession is unlikely to have started in first quarter 2022, despite two consecutive quarters of declining GDP in the first half of 2022.
Why is inflation so high right now? ›The current high inflation rate can be attributed to many different factors, many of which are a result of the Covid-19 pandemic. Gapen pins rising prices on three general causes — increases in household demand and supply-chain shortages due to the pandemic, the war in Ukraine and the presence of a strong labor market.
Will house prices go down in 2024? ›
Inflation has likely peaked but it could be 2024 before it drops back below 3%. House prices are expected to continue to fall through to mid-2023. The Official Cash Rate is expected to increase to a peak of 4% by year end before starting to fall in 2024.
Will house prices go up or down in 2023? ›Our new, higher, interest rate forecasts mean that we now expect house prices to fall marginally in 2023 and 2024. While there are risks on both sides, our base case is that prices drop by 5% overall, reversing a fifth of the surge in house prices since the pandemic began.
What will happen if the housing market crashes? ›Borrowers are discouraged from taking out loans when interest rates rise. On the other side, house construction will be affected as well; costs will rise, and the market supply of housing will shrink as a result.
Do prices go down in a recession? ›While the prices of individual items may behave unpredictably due to unexpected economic factors, it is true that a recession might cause the prices of some items to fall. Because a recession means people usually have less disposable income, the demand for many items decreases, causing them to get cheaper.
Will house prices go down in a recession? ›In general, a recession typically causes real estate values to decrease because there is a lower demand for homes or investment properties.
Will home prices drop in a recession? ›A US housing recession has arrived and it could lead to a 20% decline in home prices and Fed interest rate cuts by 2023, chief economist says.
Why is there a recession in 2022? ›The labor market is robust
Lower revenue compels businesses to cut back on staff, which leads to higher unemployment. Ultimately, higher unemployment leads to lower consumer spending and that creates a vicious cycle. In 2022, however, unemployment is still at a record low.
During a traditional recession, the Fed will usually lower interest rates. This creates an incentive for people to spend money and stimulate the economy. It also typically leads to more affordable mortgage rates, which leads to more opportunity for homebuyers.
Where should you put your money during a recession? ›Investors typically flock to fixed-income investments (such as bonds) or dividend-yielding investments (such as dividend stocks) during recessions because they offer routine cash payments.
Why is the US in recession? ›U.S. GDP declined by 0.9% year-on-year in the second quarter and by 1.6% in the first, meeting the traditional definition of a recession. The slump in growth was driven by a number of factors including falling inventories, investment and government spending.
Who benefits from inflation? ›
2. Equity and Commodity Investors. Despite low economic growth rates, investors can benefit from inflation if they hold the correct stocks and commodities in their portfolios. Equity investors: Putting your money in stocks is much better than holding cash during times of high inflation.
How can we stop inflation? ›Monetary Policies
One significant monetary way to curb Inflation is to control the money supply in the economy. If the money supply goes down, the demand for goods will reduce, causing a price fall. Another way to curb the money supply is when the government withdraws specific paper notes or coins from circulation.
There are three main causes of inflation: demand-pull inflation, cost-push inflation, and built-in inflation. Demand-pull inflation refers to situations where there are not enough products or services being produced to keep up with demand, causing their prices to increase.
Why does the government say we are not in a recession? ›Industrial production remains near its all-time high level as of June, job growth has been surprisingly solid given ultra-low unemployment rates, job openings are still near record high levels, and inventory levels in many parts of the economy remain very low. This isn't a recessionary economy by any means.
Who benefits in a recession? ›Rental agents, landlords, and property management companies can thrive during a recession when renting is likely to become a more appealing option, if not the only one available.
What can the government do to fight a recession? ›To counter a recession, it will use expansionary policy to increase the money supply and reduce interest rates. Fiscal policy uses the government's power to spend and tax. When the country is in a recession, the government will increase spending, reduce taxes, or do both to expand the economy.
What is an example of recession? ›The most common example of a recession and depression is the global recession of the 2008 financial crisis and the Great Depression of the 1930s, respectively.
What will happen to the US economy in 2022? ›This outlook is associated with persistent inflation and rising hawkishness by the Federal Reserve. We forecast that 2022 Real GDP growth will come in at 1.4 percent year-over-year and that 2023 growth will slow to 0.3 percent year-over-year.
What will be the biggest economy in 2050? ›This statistic shows the projected top ten largest national economies in 2050. By 2050, China is forecasted to have a gross domestic product of over 58 trillion U.S. dollars.
Why did everything get so expensive? ›The pandemic and the supply chain crisis have pushed the cost of virtually everything higher. Food and cars are more expensive, as are transport and labor costs, making inflation the buzzword of the moment. In February, consumer prices increased at a level not seen since the start of 1982.
When did the last recession start and end? ›
How often do recessions happen? ›Again, since 1857, a recession has occurred, on average, about every three-and-a-quarter years.
How long do recessions last on average? ›3. How long do recessions last? The good news is that recessions generally haven't lasted very long. Our analysis of 11 cycles since 1950 shows that recessions have persisted between two and 18 months, with the average spanning about 10 months.
What are the signs of a recession? ›- Widespread Increases in Layoffs and Hiring Freezes.
- The Cost of Copper is Falling.
- Gas Prices Have Been Rising.
- Slowing Home and Auto Sales.
- GDP Contraction Was Miniscule.
- U.S. Consumer Spending Remains Strong.
- Healthy Balance Sheets and Rosy Outlooks.
- The Labor Market is Strong.
Historically, house prices tend to fall when there is a deep and prolonged contraction in the economy with rising unemployment.
Who benefits in a recession? ›Rental agents, landlords, and property management companies can thrive during a recession when renting is likely to become a more appealing option, if not the only one available.
Where should you put your money during a recession? ›Investors typically flock to fixed-income investments (such as bonds) or dividend-yielding investments (such as dividend stocks) during recessions because they offer routine cash payments.
What do you do with money in a recession? ›- Make your dollars go further. ...
- Take another look at your spending. ...
- Get rid of high-interest credit card debt. ...
- Extra cash? ...
- Stay the course with your investments and think long term. ...
- Consider rolling over to a Roth IRA.
During a traditional recession, the Fed will usually lower interest rates. This creates an incentive for people to spend money and stimulate the economy. It also typically leads to more affordable mortgage rates, which leads to more opportunity for homebuyers.
Does inflation Cause recession? ›High inflation rates can indicate an impending recession, as businesses react to higher costs by reducing production and increasing prices. And if the Federal Reserve takes action in the form of more rate hikes to curb rising inflation, there's a risk that the move could help trigger a recession.
Will there be recession in 2023? ›
The decline in corporate profits will probably speed up in coming quarters, highlighting an economic slowdown that will likely lead to a U.S. recession in 2023, Fitch Ratings said.
What causes a recession? ›When demand peaks and starts to decline, the excessive supply of goods and services that aren't consumed can lead to a recession, with companies producing less and downsizing while people lose purchasing power and consumption continues to fall.
What will happen to house prices in 2023? ›Our new, higher, interest rate forecasts mean that we now expect house prices to fall marginally in 2023 and 2024. While there are risks on both sides, our base case is that prices drop by 5% overall, reversing a fifth of the surge in house prices since the pandemic began.
Is it good to buy a house right now? ›As for the buyers who can afford it, the crisis became a good opportunity to upgrade into a bigger space or diversify their investment portfolio by buying real estate at much affordable prices.
How long did it take for house prices to recover after 2008? ›It took 3.5 years for the recovery to begin after the recession began. A lot of buyers who bought in 2008, 2009 or 2010 saw their home prices decrease before the recovery started in 2011. Condos deprecated by only 12%, while single-family homes depreciated by 19% after the recession.
Who makes money in a recession? ›Healthcare, food, consumer staples, and basic transportation are examples of relatively inelastic industries that can perform well in recessions. They may also benefit from being considered essential industries during a public health emergency like the COVID-19 pandemic.
How many times has the US been in a recession? ›Starting with an eight-month slump in 1945, the U.S. economy has weathered 13 different recessions since World War II.
Does a recession affect Social Security benefits? ›A recession could affect when you begin claiming Social Security benefits. Deciding when to begin claiming Social Security benefits is a crucial retirement move, because it will affect how much you receive each month in benefits for the rest of your life.