Foreman Angel Gonzalez and Anthony Harris, with E-Z Bel Construction, work on pipes along Fredericksburg Road during an excessive heat warning in San Antonio, Texas, July 19, 2022.Foreman Angel Gonzalez and Anthony Harris, with E-Z Bel Construction, work on pipes along Fredericksburg Road during an excessive heat warning in San Antonio, Texas, July 19, 2022.

The White House doesn't think the economy is going to go into a recession. Wall Street isn't as positive about the future as it is about the present.

The picture is nuanced. There is a lot of chatter but nothing is screaming recession. The jobs market is still good, manufacturing is still growing, and consumers are still flush with cash, even though they are less willing to part with it these days.

With second-quarter GDP data due out Thursday, the question of whether the economy is merely in a natural slowdown after a robust year in 2021, or in a sharper downturn that could have extended repercussions, will be on everyone's minds.

"This is not an economy that's in recession, but we're in a period of transition in which growth is slowing." Many sectors of the economy are affected by a recession. We don't have that

Kevin Hassett, head of the National Economic Council during the Trump administration, said on Monday that the White House was making a mistake by not owning up to reality.

We are sort of in a recession. Hassett told Andrew Ross Sorkin during a live interview that it was a difficult time.

He said that if he were in the White House, he wouldn't deny that it's a recession.

The economy has a good chance of hitting the rule-of-thumb definition of two consecutive quarters with negative GDP readings. A gauge from the Atlanta Federal Reserve shows that the second quarter is on track to hit the same number as the first.

Wall Street is seeing things in a different way. The GDP forecast for the second quarter is a gain of 1% according to the consensus of economists.

Most of the economic activity in the first quarter was done by consumers.

Spending fell in the April-to- June period. Personal consumption expenditures decreased in May after increasing in the first three months of the year. Real spending fell in three of the first five months of the year due to inflation.

Consumer inflation is the biggest risk to the U.S. economy right now.

The recent retreat of fuel prices has been trumpeted by the administration of President Joe Biden.

The Atlanta Fed's sticky consumer price index, which measures goods whose prices don't fluctuate much, has been rising at an alarming rate.

Personal care products, alcoholic beverages and auto maintenance ran at an 8.1% annualized rate in June, or a 5.6% rate over the course of the year. The central bank's flexibleCPI, which includes things such as vehicle prices, gasoline and jewelry, rose at a stunning 41.5% annual rate.

There are some holes in the argument that inflation will be brought under control once the economy returns to higher demand for services over goods. In the first quarter of this year, services spending accounted for over half of all consumer outlays, compared to less than one third in the first quarter of 2019. The shift has been unremarkable.

The Federal Reserve's interest rate hikes could double before the end of the year if inflation stays high. A 0.75 percentage point increase is expected to be approved by the Federal Open Market Committee.

Main Street and Wall Street have been in sell-off mode for much of the year as the Fed tightens monetary policy. The main bulwark for those who think a recession isn't coming is the employment picture, which has been warned that higher prices could cause cutbacks.

The fed funds level is expected to range between 3% and 4% by the end of the year. The Fed usually starts hiking less than a year after its last cut, and futures pricing indicates that will happen in the summer of 2023.

Markets have begun pricing in a higher risk of recession because of the tighter policy.

Goldman's economists said in a client note that the price of inflation control is likely to be recession-inducing if the Fed delivers on further significant hikes and slows the economy sharply. It makes sense that the market has worried more about a Fed-driven recession on the back of higher core inflation prints because the persistence ofCPI inflation surprises clearly increases those risks.

The Goldman team said there is a chance that the market may have over priced the inflation risks, but it will need to convince people that prices have peaked.

The financial markets are pointing to a recession.

The 2-year Treasury yield went above the 10-year note in July, but hasn't gone down since. For decades, the inverted yield curve has been a good indicator of a recession.

There is a relationship between the 10-year and 3-month yields. The curve is not inverted yet, but it is flatter than it has been in the past.

The 3-month rate should be raised until the 10-year rate surpasses it.

The Goldman team said that the lag between policy tightening and inflation relief increases the risk that policy was too slow to tighten as inflation increased.

The jobs market is wobbly.

It was the first time in over a year that weekly jobless claims went over the 250,000 mark. July's numbers are noisy because of auto plant layoffs and the Independence Day holiday, but there are other indicators that show hiring is on the decline.

The Chicago Fed's National Activity index was negative for the second month in a row. The percentage difference between companies reporting expansion and contraction was the lowest since May 2020.

There will be little to prevent a full-scale recession if the jobs picture doesn't hold up.

According to an old adage on Wall Street, the jobs market is usually the last to be affected by a recession, and Bank of America is expecting the unemployment rate to hit 4.6% over the next year.

The labor market is in a normal recession, according to Hassett. It is not an argument that the labor market is tight and the economy is strong. An argument that ignores history is what it is.