The colloquial definition of a recession isn’t actually the correct one, no matter what the financial press or Fox News says
Mainstream press should not follow conservatives and prematurely declare a recession
News that the U.S. economy shrank for two consecutive fiscal quarters has led Fox News and right-wing pundits to declare that the country is in a recession, even as outside experts reject that definition. Mainstream media outlets are largely following suit, often adopting the right’s framing instead of taking a more nuanced approach.
It is true that in mainstream discourse, two consecutive quarters of contraction is a common definition of a recession. It does not follow, however, that that definition is accurate now or was accurate in the past.
The National Bureau of Economic Research, an independent organization that decides when the U.S. is officially in a recession, rejects the definition offered in the financial and mainstream press. “The NBER's traditional definition of a recession is that it is a significant decline in economic activity that is spread across the economy and that lasts more than a few months,” the bureau writes. “We do not identify economic activity solely with real GDP, but consider a range of indicators.”
Jason Furman, the chairman of the Council of Economic Advisors for President Barack Obama, further explained why today’s numbers don’t necessarily mean the economy is in a recession.
One day before the latest numbers came out, Dean Baker, co-founder of the Center for Economic and Policy Research, offered another reason why the simplistic definition of a recession doesn’t provide the full picture. “The NBER would be laughingstocks if they said we had a recession when we were creating 400,000 jobs a month,” Baker told CNBC. “I can’t even imagine they would think for a second that we’re in a recession.”
Bloomberg’s Joe Weisenthal points out another important distinction between the first half of this year and previous recessionary periods. In prior recessions, the “US unemployment rate was either climbing prior to the declared recession, or it rose during the period where a recession was declared. That’s not the case in the first half of 2022,” Bloomberg writes in its Markets newsletter. The piece concludes that although there may be a host of problems in the economy, “the term recession may not be a good term to describe what we’ve experienced over the past several months.”
The Economic Policy Institute, whose mission is to “to defend and promote the interests of workers in economic policy debates,” also does not believe the U.S. is currently in a recession, but said the Federal Reserve should halt its aggressive anti-inflationary policies to avoid further declines.
It is certainly possible that the United States is nearing a recession, and the Federal Reserve’s focus on combating inflation by raising interest rates to slow growth could exacerbate those risks.
But relying on a simplistic definition in what is by all accounts an incredibly weird and difficult-to-define economic period is a mistake. Mainstream press often adopt the right’s framing on an issue under the pretext of being antagonistic toward a Democratic administration, and the economy is no different. Reporters and pundits should reject that reactionary approach, and instead use the NBER’s more nuanced and holistic definition.