Yellen Denies US Economy Is in a Recession Despite Recessionary GDP Numbers

After the U.S. economy met the rule-of-thumb definition for a recession by recording negative growth for two quarters in a row, Treasury Secretary Janet Yellen doubled down on the Biden administration’s view that America’s economy has not, in fact, fallen into a recession.

Yellen told a July 28 press conference that “most economists and most Americans” define a recession as a “broad-based weakening” of the U.S. economy that includes businesses shuttering in significant numbers and mass layoffs.

“That is not what we’re seeing right now when you look at the economy. Job creation is continuing, household finances remain strong, consumers are spending, and businesses are growing,” Yellen said.

Her remarks came on the same day that the Bureau of Economic Analysis (BEA) released data showing that real U.S. GDP fell by an annualized 0.9 percent in the second quarter after contracting 1.6 percent in the first quarter.

Two back-to-back negative GDP prints are a common practical definition for a recession, according to numerous economists.

Formally, however, recessions in the United States are declared by a committee of economists at the National Bureau of Economic Research (NBER), who use a broader definition than the two-quarter rule that considers a range of indicators—including employment—which has continued to grow.

“As one example, in the last three months, our economy has created over 1.1 million jobs,” Yellen said. “In the three months beginning each modern recession outside of the pandemic, our economy lost 240,000 jobs on average.”

Other metrics Yellen mentioned include consumer spending continuing to rise in the second quarter and industrial output showing “strong average growth over the first half of the year compared to sharp average declines during past recessions.”

She also singled out the large drop in private inventories that shaved over two percentage points off the headline GDP number as companies