The National Bureau of Economic Research, a nonprofit entity generally recognized as the country’s business cycle scorekeeper, defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” Though the group examines economy-wide data such as employment, real personal income, and personal consumption expenditures to help determine the length of business cycles, the marketplace has developed a rule-of-thumb definition that captures the severity and breadth of recessions — two consecutive quarters of negative gross domestic product (GDP) growth.
The United States is poised to meet that definition since the annualized economic growth rate shrank by 1.5% in the first quarter of this year and appears to have contracted at a 1.6% pace in the second quarter. As the U.S. Bureau of Economic Analysis prepares to publish an advance estimate of second quarter growth later this week, the Biden administration is already doing damage control.
“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,” the White House said in a Thursday blog post. “Instead, both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data — including the labor market, consumer and business spending, industrial production, and incomes. 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.”
