Recession or not?

We are all accustomed to partisan bickering, so much that we have become numb to it. Whether it’s immigration, crime, vaccinations, or the causes of climate change, the party talking points on each side are invariably crafted to make the opposing party look dishonest, unpatriotic, or stupid. That’s the way it has been since Jefferson split with Adams in 1796, and that’s the way it will be long after we’re gone.

Those arguments, more often than not, are supported by statistics, many of which you and I have no earthly means of confirming. When confronted with a claim that can’t be verified without spending a week at the library, we frequently choose to believe the side we identify with personally, or we get frustrated and disengage with the news altogether.

Such is the semantic debate over our current and projected economy. With mid-term elections looming, the out-of-power Republicans are eager to use the term, “recession” early and often while Democrats and the current administration in particular, would prefer to avoid that term at any cost. Which is correct? Can they both be right? Can they both be wrong?

I can only guess if the Republican view will be correct from a traditional standpoint. As of this writing, I am not yet 100% certain, but you probably are. I am writing this on Wednesday and you are reading it on Friday or later, but more importantly, the U.S. The Bureau of Economic Analysis will announce the advanced estimate of second quarter Gross Domestic Product (GDP) numbers on Thursday.

Why is that important? The traditional definition of “recession” was introduced by economist Julius Shiskin in the early 1970s. He defined a recession as “two consecutive quarters of declining GDP.” That’s how I was taught in the 1980s, and that’s the definition I have carried around in my noggin ever since.

This year, our first quarter GDP shrank at a rate of -1.6%, and the Federal Reserve Bank of Atlanta projects the second quarter to clock in at -1.2%. Even though my old friends at Kiplinger are predicting a bearish growth of 1.8% for 2022 and less than 1% in 2023, they aren’t announcing predictions specifically for the second quarter (2% to 3% is considered healthy).

To the delight of the Biden administration, other handicappers are predicting brighter outcomes. Bloomberg is projecting a rise of 0.4% in the second quarter and Goldman Sachs is even more bullish with a projection of 0.7%, either of which would avoid the taint of a technical recession as I learned it decades ago.

As they say on late-night commemorative dishware commercials, “but wait, there’s more.” The Biden Administration and other left-leaning stalwarts are claiming that the definition of recession that I was taught is no longer valid. When challenged by reporters about the President’s claims that we are not in a recession, Press Secretary Karine Jean-Pierre cited a definition provided by the National Bureau of Economic Research (NBER) that takes a more “holistic” approach; one that considers consumer spending, commercial production, personal income, business spending, and employment. We know that unemployment is low, and spending is up, so the Biden Administration, by that definition, can put a comparatively happy face on the situation.

I also checked for definitions of recession with economic outfits like Forbes, Economic Times and Motley Fool, as well as the popular dictionaries, Oxford and Webster. Remarkably, there wasn’t a mention of two consecutive quarters of GDP among them. So where does that leave us? We’re back to square one with competing arguments about figures we can’t confirm and definitions that aren’t consistent.

What we do know is our own family and business finances. For now, gasoline is backing down from the five-dollar mark, but we are getting no relief at the grocery store. Inflation is headed for double digits and interest rates will have to climb substantially to halt further weakening of the dollar.

From where I sit, a two-year shutdown of the economy, artificially low-interest rates, supply chain problems and increased regulation of fossil fuels can’t be good. Whether we will have two consecutive declines in 2022 or 2023, I don’t know. Whatever we call it, I’m sure it will feel like a recession, but there is one indicator that tells me it may not be as severe as it is represented on the campaign stump. Gold, the traditional safe haven among traders, is currently down from its peak in March, and that tells me that the big boys aren’t too worried. Call it what you will, but to me, it’s a recession. Thankfully, I don’t think it will be a bad one.