Having hope that things will improve is a noble trait because hope is better than fear. Lying about the state of things to induce hope is terrible. Lying because it’s politically expedient is even worse. Here’s a cold, hard fact: 70% of Americans believe we’re either in a recession or entering one. Here’s another fact: Joe Biden is telling people to ignore what they see.
It’s not just the American consumer, though. American businesses are convinced a recession is near too. The Federal Reserve surveyed small business owners and found that most believe a recession is upon us. Those small business owners not only accept a recession is coming, but they’re also acting up on that belief by battening down the hatches of their company. The survey found all manner of shifts from cutting purchases, freezing hiring, lowering expenses, or even layoffs.
Large companies like Amazon, Facebook, and Walmart are taking similar actions. Beyond consumers and businesses, economists believe a recession is coming too. Using a broad range of possibilities, 47.5% of them think a recession will arrive in the next twelve months.
White House dodges reality.
Who doesn’t believe a recession is coming? According to the first survey, about 30% of Americans and Joe Biden’s White House. But even this administration is hedging its bets on an economic downturn. Instead of dealing with fears, the White House would like you to know that we aren’t in a recession because the National Burea of Economic research hasn’t called a recession yet.
In a blog post, the White House is trying to explain to Americans that we aren’t in a recession nor headed into one:
While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle. Instead, both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data … Based on these data, it is unlikely that the decline in GDP in the first quarter of this year—even if followed by another GDP decline in the second quarter—indicates a recession.
This statement tells us that Joe Biden’s administration believes the second quarter GDP report coming out this week will be dreadful. They’re intimating that it will be another negative growth report. That means we’ll have had back-to-back quarters of negative GDP growth.
Recession in the eye of the beholder.
The White House is not wrong in its definition of a recession. As I wrote last month, and I’m saying we’re in a recession now, the NBER always declares a recession much later than when one officially begins. For the Great Recession 0f 2007-2008, the NBER did not announce a recession until December 1, 2008 — but they said the recession started at the end of 2007.
We were in a recession for the entirety of 2008. Bear Stearns and Lehman Brothers both liquidated, Congress passed emergency bailout legislation, the stock market collapsed, and the Federal Reserve and Treasury Department operated with emergency powers to save the financial system. All that with layoffs with panic spread rapidly well before the NBER ever declared recession.
By the time the NBER declared a recession, it was almost over. But we wouldn’t know that for some time either because the NBER didn’t report the recession over until fall 2010 when the end date was summer 2009.
Icebergs and predictions.
In sum, only fools make financial decisions on the declarations of the NBER. What the White House is doing now is playing technical word games with an economy that is flashing warning signs. A ship captain telling people that the Titanic hasn’t hit an iceberg while traveling right towards an iceberg is not comforting nor sane.
That analogy may seem harsh, but it’s what Treasury Secretary Janet Yellen is saying on shows like Meet the Press: “you don’t see any of the signs now — a recession is a broad-based contraction that affects many sectors of the economy—we just don’t have that.”
According to Joe Biden and this administration, there are no signs of a recession. Remember, 70% of Americans and most businesses are preparing for a downturn. Economists see increasing recession dangers. The Federal Reserve is hiking rates for the express purpose of causing an economic slowdown to cool inflation.
As a consumer, you can trust the government, which has a political interest in you, believing that economic conditions are good. Or you can trust where the money is headed in markets, which is preparing for an economic downturn. The choice is yours, just don’t expect the NBER to tell you what to do. By then, it’ll be too late.