According to Janet Yellen, despite the decline in GDP, there are no signs of a recession now
The Treasury Secretary, Janet Yellen, said on Thursday that despite two consecutive quarters of negative gross domestic product (GDP), the U.S. economy does not appear to be experiencing a recession.
According to Chairwoman Janet Yellen, during a press conference after the release of the GDP data on Thursday, she did not see any signs that the economy is in decline since job growth and consumer spending have remained strong throughout the year.
The vast majority of economists and the vast majority of Americans agree on the definition of a recession: substantial job losses and mass layoffs, businesses shuttering, private sector activity slowing significantly, and family budgets under enormous pressure, along with a generalized weakening of our economy,” Yellen said.
This is not what we’re seeing at the moment, that’s not what we’re seeing. The economy is showing signs of growth in terms of job creation, household finances remain strong, consumers are spending more money, and businesses are growing.
In the past three months, the U.S. economy has grown at an annualized rate of 0.9 percent, marking the second consecutive quarter that the economy has grown at a negative rate. While the rule of thumb of two negative quarters for determining when the U.S. is in recession has been around for a very long time, economists also take into consideration job growth and other areas of the economy when making such a judgment.
According to Labor Department statistics, Janet Yellen acknowledged that households are still under a great deal of stress due to the high level of inflation, which reached a rate of 9.1 percent in June. Low- and middle-class families are struggling to keep up with rising food and fuel prices, as national measures of household spending and wealth remain stable, while the high prices of food and fuel have taken a serious toll on low- and middle-income families.
According to Janet Yellen, we haven’t seen anything like this since the 1970s and this is a historic occurrence.
Families are very concerned about their household budgets because of what is happening with the food prices, energy prices, rent prices, and other prices in the economy right now,” she said. It is a real pressure that we recognize, and it’s part of the president’s top priorities to bring down inflation as quickly as possible.”
In spite of this, Janet Yellen said that the slowdown in GDP indicated that the U.S. economy had grown rapidly through 2021 and was now transitioning to a “more steady, sustainable growth.”
In spite of aggressive interest rate increases this year by the Federal Reserve, the U.S. added 1.1 million jobs in the second quarter. Despite a decline in GDP, consumer spending has remained high, and wages have increased by 5.1 percent in the last month.
Economics experts say that although the administration’s $1.9 trillion stimulus bill played a role in fueling high inflation in March 2021, it is only one of many factors – most of which are related to C-19 – that have contributed to high prices globally.
Nevertheless, Republican lawmakers have accused Biden of being responsible for causing the economy to enter a recession in the first place.
In the United States, there is no official threshold set by the federal government to determine when the U.S. economy is in a recession and when it is not. In place of that, economists usually rely on the National Bureau of Economic Research (NBER), a think tank that is not affiliated with the government, to make that decision.
The White House has been insisting for days that the U.S. is not in a recession simply because of two straight quarters of decline, citing the NBER’s criteria for calling a recession. According to Janet Yellen, the administration should not be caught up in a “semantic battle” over the economy, but rather focus on how to solve it.
The economy is slowing down. I have enumerated a variety of risks to the outlook, but we also have great strengths in the economy,” Yellen said.
“We shouldn’t get caught up in semantics,” she said. “Let’s talk about what’s happening.”