'US economy is not in a recession despite a 2nd straight negative GDP'

Despite a second consecutive negative GDP reading, Janet Yellen claims that the US economy is not in a recession due of the robust job market.
Despite the US economy posting a negative second-quarter GDP figure on Thursday, Treasury Secretary Janet Yellen is joining to the rising chorus that states that the US economy is not in a recession.

After decreasing by 1.6 percent in the first quarter of 2022, GDP growth decreased by 0.9 percent in the second quarter. A recession is often characterised by two consecutive quarters of negative GDP growth, according to an unofficial rule of thumb.

But like Fed Chairman Jerome Powell, Yellen cited the robust employment market as evidence that the US economy has not experienced a significant slowdown in growth. A genuine economic downturn is a "economic weakness that is widespread. That is not what we currently observe, "At a press conference on Thursday, Yellen remarked. Instead, the US economy has created 2.7 million new jobs so far this year, with 1.1 million of those employment coming in the second quarter alone.

According to Yellen, this is a significant departure from previous recessions, which witnessed an average loss of 240,000 jobs during the first three months of the slowdown. As a result, there is still a lack of workers to fill available positions. Additionally, Yellen stated that future consumer price increases are "expected to drop down in the days ahead" even if inflation is still high and pressuring consumers. She is hoping for a halt in rising prices, and a drop in commodity prices, notably those for food and gasoline, would be a huge relief to consumers.

In the end, it comes down to semantics as to whether the US economy is genuinely experiencing a recession. A recession is defined as "a considerable fall in economic activity that is distributed across the economy and lasts more than a few months" by the National Bureau of Economic Recession, which is responsible for making the formal declaration.

"The committee's view is that while each of the three criteria—depth, diffusion, and duration—needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another," the NBER says on its website.

Jobs have a major role in that criteria. Furthermore, it might require a sharp increase in job losses for the NBER to agree to classify the current economic downturn as a true recession given that the unemployment rate is still close to a 50-year low.