The U.S. economy is not in a recession because it has not met the complex criteria that would define such an economic downturn, Treasury Secretary Janet Yellen said Thursday during a press conference. She spoke following the release of gross domestic product (GDP) data showing declining growth for a second consecutive quarter.
Yellen’s interpretation differs from those who define a recession as occurring when GDP shrinks for two straight quarters. However, there are some economic observers who have said the factors behind a recession are more complex than previously thought.
U.S. GDP fell by an unexpectedly high 0.9% for the second quarter after dropping over a percentage point for the previous three months.
Yellen said the real definition of a recession is a “broad-based weakening of the economy,” and “that is not what we’re seeing right now.”
She also said a “semantic battle” about whether the country is in a recession should be “avoided.”
“What we can constructively do is talk about what is the state of the economy,” she said, highlighting that the labor market remains “exceptionally strong.”
Inflation remains the Biden Administration’s main priority, and there’s a possibility the Federal Reserve can tame inflation without causing the labor market to suffer, Yellen said, reiterating a previous talking point.
“There’s a path to bring down inflation while maintaining a strong labor market,” Yellen said. “It’s not a certainty that that can be done, but I believe there is a path to accomplishing that.”
Inflation is still running at a four-decade high of 9.1%, causing American households to think twice, be it about everyday things like groceries or investing in risky assets such as cryptocurrencies. Bitcoin (BTC) has plunged about 50% in value since the start of the year, and ether (ETH) and other major alternative coins have suffered steep declines as well.
But U.S. employers added 372,000 jobs in June, suggesting there is still enough capital in the economy for expanding businesses. Yellen said that in past periods of recession, the labor market lost a significant number of jobs, which currently is not the case.
To be sure, she said, the economy is seeing “significant slowdown in growth” but there are “great strengths,” too.
In the end, Yellen said, the “official arbiter of what is a recession is going to be the [nonpartisan] National Bureau of Economic Research. They’ll decide it some time in the future.”