The shrinking economy of the USA has grabbed the people’s attention mounting worries and fear about the economy’s stability and resilience.
The U.S. economy has contracted for a second straight quarter, at an annual rate of 0.9 percent, sparking worries that the nation may be entering a recession and adding to the political difficulties facing the Biden administration as it battles with decades-high inflation.
Although economists dispute the likelihood of a complete recession, the Bureau of Economic Analysis’s fresh data, which was announced on Thursday, comes at a turbulent time for the economy. In the past, a recession was often identified by six consecutive months of contraction. A team of experts determines the official outcome, despite the fact that recessions are unusual when unemployment is close to record low levels.
The decline in the second quarter was due to changing consumer and corporate habits. As consumers switched their spending away from things and toward services like hotels and restaurants, retailers purchased fewer goods, including cars. The poor reading was also impacted by declining housing construction and government spending.
The disappointing GDP report highlights persistent issues with inflation, which has been around 40-year highs for several months, as well as declining home sales and difficulties for some corporate sectors, including tech and finance. Even the booming labor market is starting to show signs of weakness. Numerous experts have predicted a recession for the following year due to broader concerns about the Ukraine conflict, the future of the global economy, and aggressive interest rate hikes.
“Broadly, this shows an economy that is really slowing,” said Jason Furman, an economics professor at Harvard University who was a top economic adviser to President Barack Obama. “This data is much more worrisome than it was in the first quarter. I don’t think you can easily dismiss these numbers. It isn’t just volatile factors anymore. Meaningful, important parts of the economy are slowing.”
Senior authorities, notably Treasury Secretary Janet L. Yellen, have strongly refuted claims that the economy is in a recession by pointing to a robust labor market as evidence that the recovery is still on pace. White House officials had maintained that even a second-quarter growth number that was negative shouldn’t be seen as an indication that a recession had begun prior to Thursday’s news.
“Coming off of last year’s historic economic growth … it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” President Biden said in a statement Thursday. Later speaking to reporters on Thursday, Biden ticked off a litany of high points for the economy, including jobs creation, low unemployment and business investments, ending with: “That doesn’t sound like a recession to me.”
Republican politicians have claimed that the nation is in a recession and that the Biden administration’s stimulus spending is to blame for inflation and the overall economic downturn.
“You don’t need a fancy economics degree to have seen this coming,” Rep. Kevin Hern (Okla.) said in a statement Thursday. “Biden’s spending over the last 18 months is directly responsible for the economic situation we’re in today.”
President Biden released a statement on the figures, saying:
‘[W]e are on the right path and we will come through this transition stronger and more secure,’ the president wrote in his statement. ‘Our job market remains historically strong, with unemployment at 3.6% and more than 1 million jobs created in the second quarter alone. Consumer spending is continuing to grow.’
‘My economic plan is focused on bringing inflation down, without giving up all the economic gains we have made. Congress has a historic chance to do that by passing the CHIPS and Science Act and Inflation Reduction Act without delay.’
The United States unexpectedly saw its economy slow down by 1.6 percent annually in the first three months of the year. This unexpected slowdown was largely caused by an imbalance in trade, with the country importing far more than it was exporting, and a decline in inventory purchases by companies that were still flush with holiday leftovers.
Representative Doug LaMalfa lashed out at President Biden for his ‘first instinct’ being to ‘deny problems exist.’
‘[S]ee: inflation, gas prices, Afghanistan, Hunter, etc.,’ the lawmaker tweeted.
‘We are facing a recession and no amount of changing definitions alters what the American people see,’ LaMalfa continued. ‘Ignoring problems doesn’t make them go away, it makes them worse.’
Louisiana Senator Bill Cassidy said via tweet that Democrats have turned the ‘American Rescue Plan’ into the ‘American Recession Plan.’
‘The Biden administration does not have a real plan,’ he insisted.
Yellen refuted GOP allegations that the economy is in a recession on Thursday, claiming that consumption was showing signals of ongoing growth and represented a welcome change from growth that was happening too quickly.
“Overall, with a slowdown in private demand, this report indicates an economy transitioning to more steady, sustainable growth,” Yellen said, adding that recessions are typically defined by economists to include “substantial job losses and mass layoffs,” business closures, a decline in private-sector activities, and a “broad-based” weakening of the economy.