President Joe Biden said he is not concerned about a possible recession this year but is about one occurring next year.
During a press conference on April 28, Biden was asked the question, "How concerned are you about a recession, given the GDP report today showed a contraction of 1.4% in the first quarter?"
The president's response was "Well, I am not concerned about a recession," citing low unemployment numbers and high consumer spending. Later on in the press conference, the president admits "some are predicting there may be a recession in 2023" which he then says he is concerned about.
According to today's release from the Bureau of Economic Analysis (BEA), the U.S. economy is in negative growth territory, as real gross domestic product (GDP) declined at an annual rate of 1.4% in the first quarter of 2022. In the fourth quarter of 2021, real GDP grew 6.9%.
According to the Wall Street Journal, the first quarter was the weakest since spring 2020, when the Covid-19 pandemic and related shutdowns drove the U.S. economy into a short-term recession.
Forbes reports that in 1974, economist Julius Shiskin defined a recession as two consecutive quarters of declining GDP. Shiskin noted a healthy economy expands over time, so two quarters in a row of contracting output suggests there are serious underlying problems. This definition of a recession became a common standard over the years. Looking at today's first-quarter GDP release and in accordance with this rule of thumb, the U.S. economy is halfway toward a recession.
The first-quarter drop in GDP is attributed to a variety of factors, the WSJ reports. From a widening trade deficit, the U.S. has imported far more than it has exported. Additionally, the slower pace of inventory investment by businesses in the first quarter—compared with a rapid buildup of inventories during the fourth quarter of 2021—also pushed growth lower. Lastly, fading government stimulus spending related to the pandemic weighed on GDP.
The WSJ notes that high inflation is cutting into households’ purchasing power. This month, the U.S. Bureau of Labor Statistics announced consumer prices rose 8.5% in March from a year earlier, a four-decade high. Although average hourly earnings were up 5.6% over the same period, elevated inflation is wiping away pay gains for many workers. According to an April 12 report from the World Economic Forum, both retail and professional investors hold a gloomy outlook on the country's economic future.
A Bloomberg Markets Live survey, conducted between March 29 and April 1, revealed that 48% of investors expect the U.S. to fall into recession next year. Another 21% expect the downturn to happen in 2024, while 15% of the 525 respondents expect the recession to come as early as this year.
Upon reviewing public statements, Arizona senators Kyrsten Sinema and Mark Kelly have yet to provide commentary on the country's economic downturn in GDP.