The rebound in U.S. gross domestic product in the third quarter comes as a welcome surprise for Democrats heading into midterm elections, potentially putting to rest the notion that the country is already in a recession. But for workers and investors, the report isn’t quite so reassuring.
Consider the impact on public perception. GDP, arguably the most publicized economic statistic in America, had contracted in the previous two quarters, bolstering the argument that the U.S. was already in a downturn, based of course on a flimsy rule-of-thumb definition of recession as two consecutive quarters of declining real growth. This year has been a master class in why rules of thumb are so perilous because the weak first-half numbers were driven by volatile inventory and trade components and could yet be revised to look much more benign.
For all practical purposes, the U.S. almost certainly skirted recession in the first half of the year. The most palpable aspects of any recession are job losses and declining income, and unemployment has hovered near a five-decade low in the period while consumers, the U.S.’s economic engine, have spent their money at a mostly steady pace. The U.S.’s official arbiter of recessions, the National Bureau of Economic Research’s Business Cycle Dating Committee, defines recession as a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.” As the committee makes clear, it will make its final call based on considerations of depth, duration and diffusion, and the apparent first-half contraction can’t possibly be considered diffuse.
