Who Decides What a Recession Is?

A Dispatch explainer.

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Anticipating the Bureau of Economic Analysis’ release of second-quarter gross domestic product (GDP) numbers on Thursday, the White House released a statement last week arguing that two successive quarters of negative real GDP growth do not officially qualify as a recession.

Soon after, the administration faced criticism for “redefining what a recession is,” in the words of Fox News correspondent Jacqui Heinrich.

So what is a recession? It’s a sustained period of economic decline often popularly understood to mean at least two consecutive quarters of negative growth in real GDP—GDP adjusted for inflation. Journalists and analysts often refer to it as a “technical recession.”

If Thursday’s GDP numbers are negative, they will mark the beginning of a technical recession. This year’s first-quarter GDP decreased by 1.6 percent.

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Comments (21)
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  1. Duane Truitt

    An argument fit only for wonks. Doesn’t matter what the label is … what matters are the effects. We are obviously having a stalled economy. Nobody disputes that growth for the last half year is negative.

    The important questions have to do with what comes next … further stalling (no growth), a deepening and lengthening downturn … or a quick snap back? Will jobs start to be cut … will real earnings continue to plummet due to out of control inflation?

    It is these kinds of answers that voters need, and business managers and investors too. Nobody cares about the label affixed to whatever is going on now.

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    MatthewRobin

    I have loved every Dispatch Explainer. You all need to turn this into a product a la Dispatch Fact Check.

    I will use this time to continue to advocate for Dispatch Fact Checks to be sent out as an email newsletter. Now ditto with Dispatch Explainer.

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    J. Eric

    Clarifying. Thanks

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    BrettH

    The White House messaging on this subject just stinks of political desperation. Partisans can argue how to measure it however they like. That’s not going to change the very real economic angst a lot of Americans are feeling these days.

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    Brian Ruff

    Good explainer. My own two cents (sorry, bad pun) on the subject: the Biden administration defines recession down at their own peril. Everything is lived experience. If enough people perceive economic stress, then that's their reality. Economy-splaining to someone hurting will only further alienate them - and there's a lot of that going around.

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  6. Raincheck

    Whatever the merits of the different definitions, the Biden motivation is simple, If you use the NBER, you are unlikely to have a recession officially declared until after the midterms. If a Republican were President, Democrats and the media would be using the “two months” definition.

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    Rjosephpaquette

    You can call two quarters of negative growth a “duck” instead of calling it a recession, doesn’t mean it’s going to float on water or anyone will be fooled.

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    1. Ingenero.lux

      But is it lighter than a goose? If so, it’s definitely a witch!

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      1. BadgerBill

        But how do you know she’s a witch???

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        1. Ingenero.lux

          She turned my 401k into a newt! And it hasn’t gotten better!

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        Rjosephpaquette

        Monty Python pull. Nice.

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    Show Jay Janney the 🚪!

    A recession is when your neighbor loses their job, a depression is when you lose yours, and a recovery is when Joe Biden loses his job!

    with apologies to Ronald Reagan.

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    The Bell Tower

    The economy sucks. Call it whatever you want, blame whomever you want. Whatever.

    It’s silly to blame only Biden and Democrats but each side would take the opposite position if they were in power. It’s also silly to pretend that some of the policies pushed by Biden and Democrats aren’t part of the problem. Neither party has shown any appetite for financial discipline so it doesn’t much matter what they’re saying about it.

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      Brian Ruff

      https://www.youtube.com/watch?v=rx5mE9XPcWw

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        The Bell Tower

        This is awesome.

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  10. Joe1776

    "According to the NBER website, the BCDC defines a recession as .....All this amounts to a much more ambiguous definition than the technical definition."

    "When historians and economists of the future study this period, they’ll likely be using the NBER’s standard of a recession due to its precision and specificity."

    I think we understand the terms "ambiguous" "precision" and "specificity" differently.

    I do think one can argue NBER's standard looks more in depth and is perhaps less superficial. But NBER's standard is an obviously less specific and precise (i.e., more ambiguous) definition than simply saying 2 quarters of negative adjusted gdp.

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