“This is not an economy that’s in recession, but we’re in a period of transition in which growth is slowing,” Treasury Secretary Janet Yellen told NBC News on Sunday, though she noted that there are “threats on the horizon.”
Expect several key reports this week on US economic health and consumer prices to offer a glimpse of how bad things could get. On Wednesday, the Federal Reserve is also expected to raise interest rates again in an attempt to tame inflation, though some experts think the Fed’s new aggressive strategy came too late and risks tipping the economy into a recession.
“But perception doesn’t always line up with reality, and the economists at the Federal Reserve are as susceptible to capricious economic shifts as you and I. There is no official rulebook to follow; they make their monetary policy through trial-and-error, and there have been errors,” she continues.
“The Fed, much like Madonna, is constantly evolving. This institution that aims to project an aura of stability is not beyond surprising us.”
Meanwhile, amid all the focus on inflation’s erosion of the strength of US paychecks, Goodkind notes that this week marks a sobering milestone for struggling American families: It’s been 13 years since the last time the US federal minimum wage was raised, to $7.25 an hour, making it the longest period without a raise since the federal minimum wage was enacted in 1938. (About 30 states and Washington, DC, have minimum wages above the federal standard.)
That can’t be helping Biden in the face of dismal poll numbers on the economy. Only 18% of Americans in that CNN survey described the nation’s economy as in good shape, while 82% said economic conditions are poor.
Responding to the news earlier this month that inflation had surged to a new pandemic-era peak in June, with US consumer prices jumping by 9.1% year-over-year, the White House seized on a more recent dip in gas prices, while complaining that the tumbling price was not being covered by the media with the same intensity that accompanied the hike in prices.
But public perceptions of the economy aren’t likely to change that fast.
The National Bureau of Economic Research’s Business Cycle Dating Committee abides by a relatively vague definition that allows for wiggle room: A recession, it says, “involves a significant decline in economic activity that is spread across the economy and lasts more than a few months.”
The committee also takes its time in defining when a recession begins and ends, making sure to look at data on a broad timeline. The designations often come retroactively — which means the US could currently be in the middle of a recession without anyone officially recognizing it until after the fact.
Brian Deese, the director of the White House’s National Economic Council, said on CNN’s “New Day” on Monday that the second quarter data would be “inherently backward-looking” since it reflects the situation from April through June.
“I think the bottom line is if you look at the labor market, if you look at what consumers are spending, what businesses and households are investing, you continue to see this resilience. But that’s no reason for complacency,” Deese said.
The attempt to get ahead of potentially bad economic data mirrors the White House’s approach on inflation when it recently argued that inflation numbers for June that showed the 9.1% year-on-year rise were “out of date” since they didn’t reflect a dip in gasoline prices.
But if the economic data this week suggests that the US economy is heading anywhere near a recession, it will mean another round of bad headlines for Biden and an opening for Republicans just over three months before the midterm elections.
And even if this week’s data suggest that the economy isn’t heading for a recession, it will still be a hard sell for the White House. Any president arguing that the economy isn’t really as bad as it feels to voters is in trouble.
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