Everyone knows that the economy goes into a recession when there are two consecutive quarters of negative growth.
The National Bureau of Economic Research doesn't agree with the definition of a recession.
The NBER defines a recession as a decline in economic activity that lasts more than a few months. The bureau's economists don't use gross domestic product as a primary indicator.
The U.S. could see its second straight negative-growth period in the second quarter. Since 1948, there have been two consecutive quarters of negative GDP, but this may not be the case.
What's the reason? It's not easy.
Dean Baker, co- founder of the Center for Economic and Policy Research, said that the NBER would be a laughingstock if they said we had a recession. I can't imagine them thinking we're in a recession.
During the first half of the year, nonfarm payrolls grew an average of 457,000 a month. There are more than 11 million job openings and just over 6 million available workers to fill them.
There have been some negatives.
When adjusted for inflation, consumer spending on a dollar level has been solid, but it has been less so. The trade deficit hit a new high in March. Growth is hurt by the Bureau of Economic Analysis's measure of inventories lagging.
These are just details for economists to figure out. If the Q2 GDP number comes in negative, and the White House doesn't call a recession, it will cause confusion and anger among those who have been hit by surging inflation and a clear slowdown in aspects of the economy.
Sky-high prices, widespread product shortages, and warnings from companies like Walmart that profits are decreasing due to changing consumer habits make it feel like a recession.
The Atlanta Federal Reserve's real-time tracker shows a decline in GDP in the second quarter of the year.
I don't think it's a big deal. Peter Boockvar is the chief investment officer at the Bleakley Advisory Group. The third quarter is going to be even weaker. Three quarters in a row of GDP contraction is possible. Does that mean we are in a downturn?
The Cambridge, Massachusetts-based NBER is a bit of a shadowy group, meeting in private and not making recession calls generally months after they begin. The Covid downturn began in February 2020 and ended in two months.
The government and most business news outlets use the NBER's rulings as a guide to determine expansions and contraction.
The organization uses six factors: real personal income minus transfer payments, nonfarm payrolls, employment, sales adjusted for price fluctuations and industrial production. CNBC requested comment from the NBER, but they didn't reply.
Tim Quinlan, senior economist at Wells Fargo, said in a client note that the definition is involved. It is difficult to define a recession and how deep it is throughout the economy.
Quinlan said the data points can be broken down into four different groups.
He said that the economy has never been in a recession. The economy is not yet in recession despite the fact that we don't have real sales through May.
The next question will be if the NBER calls a recession soon.
Boockvar thinks a recession is inevitable, with the NBER declaration just a matter of time. He said that he wouldn't be surprised if the start of the recession was later.
Baker is worried that Federal Reserve interest rate increases aimed at controlling inflation and slowing the economy could lead to a downturn.
He is certain that the first half of the year did not show a recession.
Were we in a recession at the beginning of the year? That just doesn't make sense. I respect the people who work at the NBER. They are not going to say that is a recession.
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