Joe Biden, Some Economists Say Recession Not Imminent, But Public Disagrees

President Joe Biden has insisted for months that the U.S. is not heading into a recession, pointing most recently to the latest jobs report as proof the economy is strong and on its way to a complete recovery from the pandemic.

But economists outside the White House, and many Americans, aren't so sure.

The debate around a potential recession reflects widespread concern about the state of the economy, underscoring Biden's struggle to convince most Americans that they're better off financially under him than his predecessor — a long standing litmus test that could spell doom for Democrats in the midterm elections this fall, and for Biden should he choose to run again in 2024.

In political terms, the public perception of a weak economy on the brink of recession may be much more important than the official determination, which is made by the National Bureau of Economic Research, a private nonprofit organization known as NBER, which most voters know little about.

"People aren't going to care if there's a label" on the economy or not when they go to vote, said Dan North, a senior economist for Allianz Trade. "What they're going to care about is how much they're paying for gasoline and food."

Still, an official declaration of recession would be a blow for Biden, who is deeply unpopular not only with Republicans and independents but also with voters in his own party. A new poll published Monday by The New York Times found that 64% of Democrats don't want Biden to run for reelection, a sizable majority. Other recent polls have also found that a majority of Americans are unhappy with Biden's handling of the economy and inflation.

Fortunately for Biden, the chances of an NBER recession declaration, at least before the midterms, is exceedingly small, given how long it usually takes the organization to analyze economic data from several federal agencies and make its final decision.

The last time the economy experienced a recession, for two months at the start of the pandemic in 2020, the economic research issued its recession declaration 15 months later, in July of 2021. According to NBER's website, the process typically takes four to 21 months to complete.

Moreover, the jobs report from June, which was released Friday, showed that the economy added 372,000 jobs last month, tamping down fears that a recession is inevitable.

"It's really hard to see the economy in recession without a significant surge in layoffs," said George Hammond, the director of the economic research center at the University of Arizona's Eller College of Management.

karine jean-pierre
White House Press Secretary Karine Jean-Pierre talks to reporters during the daily news conference in the Brady Press Briefing Room at the White House on July 11, 2022 in Washington, DC. Chip Somodevilla/Getty Images

The fears of a recession had been sparked by a decline in the growth of the country's gross domestic product in the second quarter of this year. That followed a contraction in first quarter GDP growth, a metric of economic output that is used to track the strength of the economy.

Two consecutive quarters of economic decline has been the traditional benchmark for a recession. The NBER defines a recession as a period of "a significant decline in economic activity that is spread across the economy and that lasts more than a few months."

But while the organization factors GDP growth into its analysis, it also looks at a number of other indicators, including jobs and wage growth, the unemployment rate, and industrial production.

By most of those measures, the economy is in fairly good shape. The unemployment rate remained unchanged at 3.6%, matching the pre-pandemic level and the lowest on record in five decades. The economy has now recovered all of the private sector jobs lost during the pandemic. Wages rose at 5.1% over the past 12 months, though the average hourly earnings gains were largely wiped out by inflation.

After the jobs report was released, Zandi wrote in a weekly update that there was a 40% chance of recession over the next 12 months, and a 50% chance in the next two years.

"There's just no way they're going to label this period a recession with the kind of job growth and low unemployment rate we're seeing," Mark Zandi, the chief economist for Moody's Analytics, told Newsweek. "This is not a recession."

A series of rate hikes by the Federal Reserve should cool the economy, helping slow the growth rate and further reduce concerts of an imminent recession, he said.

"I'm actually feeling much much better now than I was a few weeks ago," Zandi added. "But the economy is fragile, and sentiment is about as dark as I've ever seen it."

The question for Biden, and for Democrats trying to retain control of Congress, is whether that dark sentiment changes before November. If the price of gas, food and other goods goes down by a significant margin, it would bolster Biden's argument in the run-up to the election that he brought the economy back from the depths of the pandemic.

"The Biden administration has done everything, from a purely economic perspective, we'd want them to do," said Christian Weller, a senior fellow at the liberal Center for American Progress and a professor of public policy at the University of Massachusetts Boston. "We are getting back to something akin to the pre-pandemic normal."

White House press secretary Karine Jean-Pierre argued Tuesday the economy was headed in the right direction, noting that gas prices fell in June and have continued to decline this month.

Outside Washington, however, business leaders and others said that even if a recession is averted for now, the public perception of a weak economy won't change anytime soon.

"The cake is baked," said Gregg Peppin, a Republican consultant in Minnesota. "The overall perception of the president and his lack of leadership [on the economy], that's not going to change."