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Biden makes case that US not in recession after disappointing GDP data

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SOMERSET, MASSACHUSETTS, USA - US President Joe Biden addresses the crowd and gathered media at the closed Brayton Point Power Station in Somerset, Massachusetts, United States on July 20, 2022. (Joseph Prezioso - Anadolu Agency)
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Jul 29, 2022 - 03:34 AM

ANKARA (AA) – US President Joe Biden argued Thursday that the US economy is not in a recession after GDP data showed a contraction for a second straight quarter.

Biden said Fed Chair Jerome Powell, significant banking personnel and economists believe that the economy is not in a recession.

“We have a record job market and record unemployment of 3.6% today. We have created 9 million new jobs since I become the president. Businesses are investing in America at record rates. $100 billion of semiconductor investments are already announced,” he said at a news conference at the White House.

The president called the investments the “strongest rebound” in American manufacturing in more than three decades, creating 613,000 manufacturing jobs.

Biden argued that the Inflation Reduction Act of 2022 will reduce inflationary pressures on the economy and the bill will add another $370 billion in clean energy tax credits.

“That does not sound like recession to me,” he said.

His comments came after the Commerce Department’s first reading that was released earlier Thursday showed the economy contracted at an annual rate of 0.9% in the second quarter.

The figure follows an annual 1.6% contraction posted in the first quarter.

While GDP is one of many factors that the National Bureau of Economic Research considers when assessing if the US is in a recession, there is also a “technical recession” definition, which is referred to when there are at least two consecutive quarters of negative growth in real GDP.

Biden said there are signs of progress in the second quarter, if one looked at the job market, consumer spending and business investment.

“Households and businesses — the engines of our economy — continue to move forward,” he said at a roundtable meeting with key CEOs. “There is no doubt we expect growth to be slower than last year. But that’s consistent with the transition to a stable, steady growth and lower inflation.”

US Treasury Secretary Janet Yellen said the American economy achieved a historic recovery in the past 18 months and posted the fastest single-year decline in unemployment.

“We are in a transitional period in our economy. We are focusing on moving from a period of rapid recovery to achieving steady, sustainable growth without sacrificing the gains,” she said.

There are global headwinds, Russia’s war on Ukraine, lockdowns in China, variants of the coronavirus, she said.

“Growth is slowing around the world, inflation remains unexpectedly high,” she said. “We can see from today’s GDP report that growth in private demand has slowed. That does indicate that the economy is transitioning to a steady and sustainable growth, but job creation is continuing, household finances remain robust, consumers are spending.”

Bank of America CEO Brian Moynihan said American consumers are spending and borrowing more money. “They are worried about inflation and rent increases,” he said.

Marriott International CEO Anthony Capuano said that the last two quarters showed resilience in the travel industry as leisure led the recovery.

Biden said earlier that “it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation.”

“We’re not going to be in a recession,” he told reporters Monday. “My hope is we go from this rapid growth to a steady growth, and we’ll see some coming down, but I don’t think we’re going to — God willing — that we’ll see a recession.”

Fed Chair Powell said Wednesday the labor market is very strong.

“It does not make sense that the economy would be in a recession with this kind of thing happening,” he said. “I do not think the US is currently in a recession. The reason is that there are too many areas of the economy that are performing too well.”

The central bank’s aggressive monetary policy to try to tame record inflation, by raising interest rates a total of 225 basis points since March, has created recession worries that caused the US stock market to dive into bear territory.

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