The 8 economists who decide if the U.S. is in a recession – The Washington Post

by | Jul 27, 2022 | Financial

Listen9 minComment on this storyCommentGift ArticleDemocrats and Republicans have begun arguing over whether the U.S. economy is in a recession ahead of a key data release on Thursday. But the official pronouncement will ultimately come down to a little-known group of economists selected by the National Bureau of Economic Research called the “Business Cycle Dating Committee,” which stubbornly takes its time and tries to wall itself off from political interference or attempts to spin its findings.The stakes for the group are high, in part because of the extraordinarily unusual economic conditions two years after the last recession, early in the coronavirus pandemic. The economy contracted in the first quarter of the year, and many Republicans say a recession is here already, with Thursday’s release expected by many analysts to show a second consecutive quarter of negative growth. But from President Biden down, administration officials are instead pointing to other indicators showing the economy remains strong and insisting the committee would be wrong to declare a recession.The job market is beginning to show cracksThe political haggling is not supposed to matter to the eight economists who rule on when recessions start. Their decision is almost certainly months away, if it comes at all: The committee typically waits long after a recession has begun to declare it, only acting when the evidence has become overwhelming, sometimes even after the recession is already over. That puts the pressure bearing down on the organization from the outside — to promptly render a verdict on one of the most important matters facing economic policymakers — directly at odds with its mission to provide unassailable empirical decisions.AdvertisementAs a result, what seems like a straightforward question — is the U.S. economy in a recession? — is in part decided on a subjective basis at a later date, sometimes when it no longer appears pertinent, by experts in closed-door meetings of a privately selected committee.“By far, the most important thing to try to convey is that the committee is not trying to do real-time dating of whether we’re in a recession,” said MIT economics professor James Poterba, the NBER president and a member of the committee, in an interview. “There’s often enormous amount of interest in that question and what many people are hoping for, but the committee’s task is to create a consistent historical record of the turning points — the peaks and the troughs in the U.S. economy.”The group’s calculus could become increasingly fraught in the following months, amid puzzling economic conditions that defy easy characterization. The political consequences for the committee could be significant, as the Biden administration faces growing public anger over high inflation and its economic stewardship. Congressional Republicans will also be eager to seize on a ruling that the economy is in a recession, trying to capitalize on voter discontent ahead of this fall’s midterm elections.Are you prepared if the economy gets worse? Take this quiz to find out.Asked about the upcoming economic numbers, Biden on Monday disputed the notion that a recession was imminent. That is part of a broader administration campaign in recent weeks to rebut GOP claims that a recession has already begun. Top economic officials, including Treasury Secretary Janet L. Yellen and White House National Economic Council Director Brian Deese, appeared on cable TV news Sunday and Monday to reiterate their view that the U.S. economy is not technically in recession — and wouldn’t be even if the GDP numbers show a second consecutive quarter of contraction.This strategy has its risks, though, because if the United States does enter a recession later, their current assurances will look misguided — particularly after the administration already incorrectly dismissed the threat of inflation last year.U.S. policymakers dismissed inflation threat until it was too late“We’re not going to be in a recession, in my view. The [unemployment] rate is still one of the lowest we’ve had in history,” Biden said on Monday. …

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