Shortest ‘Recession’ In U.S. History, With No Job Losses – 3rd Quarter GDP Growth 2.6 Percent

The Doomsayers in the media who were claiming that the U.S. is in a recession (parroting GQP talking points) – despite consistent job growth numbers every month – simply because of two quarters of weak GDP numbers, owe us a an apology today. Is it too much to demand their resignations, and they can go look for work in a job more suitable to their skills?

Abha Bhattarai at the Washington Post reports, U.S. economy grows in third quarter, reversing a six-month slump:

The U.S. economy grew at an annual rate of 2.6 percent in the third quarter, marking its first increase in 2022 and a sharp turnaround after six months of contraction — despite lingering fears that the country is at risk of a recession.

The report on gross domestic product, released Thursday by the Bureau of Economic Analysis, revealed a more upbeat snapshot of the economy less than two weeks before the midterm elections, even as high inflation has proved a persistent problem for Democrats. [Wedded to the GQP talking points.]

“The irony is, we’re seeing the strongest growth of the year when things are actually slowing,” said Diane Swonk, chief economist at KPMG. “There are some real cracks in the foundation. Housing is contracting. The consumer is slowing [Christmas shopping is coming]. GDP is growing, but not for all of the right reasons.”

Financial markets were mixed on the news, with the Dow Jones industrial average up and the Nasdaq down. [The investor class, which lives off of borrowed money, only cares about being able to borrow money for free.]

Even though consumers bought fewer goods, they continued to spend on health care, which helped lift the reading on GDP, which sums up goods and services produced in the U.S. economy. An increase in government spending at the federal, state and local levels also contributed to the gains.

So the pent-up demand for goods during the pandemic which caused suppy-chain bottlenecks for goods and inflation is beginning to ease, and people are once again spending money on services and entertainment, starting to restore balance to the economy. This is a good thing. The economy is recovering.

The biggest boost, though, came from a narrowing trade deficit, with American retailers importing fewer items and exporting more goods as well as services, such as travel. [Remember when Republicans used to whine incessantly about the trade deficit?] That is a stark reversal from earlier in the year, when the gap between incoming goods and outgoing ones was at its widest on record.

Trade-related benefits, though, are likely to be short-lived. Economists widely expect GDP growth to slow in the coming months as consumers and businesses continue pulling back in the face of rising interest rates and uncertainty. By next year, many are forecasting a more protracted slump and perhaps even a recession. [A committed doomsayer. Please look for another job, lady.]

Still, the turnaround comes at a crucial time for Democrats, who are racing to assuage voter concerns about the economy ahead of the midterms in early November. Inflation — and gas prices in particular — have been one of the biggest political challenges for the White House.

On Thursday, President Biden lauded the positive GDP report while acknowledging that inflation remains a problem.

“Today we got further evidence that our economic recovery is continuing to power forward,” Biden said in a statement. “Our economy has created 10 million jobs, unemployment is at a 50 year low, and U.S. manufacturing is booming … Now, we need to make more progress on our top economic challenge: bringing down high prices for American families.”

Republican lawmakers were quick to push back. Economic growth, they said, was “fleeting” and likely to reverse in coming months. [True, if Americans are foolish enough to elect Republicans promising to blow up the economy and hold it hostage to another round of austerity.]

The positive report follows two quarters of contraction. That contraction met [only] one definition of a recession, though the official determination is made by a private group of experts. The U.S. economy shrank by 1.6 percent in the first quarter, then 0.6 percent in the second, according to revised estimates from the government.

This would be one of the shortest recessions in U.S. history, with no job losses. Pretty damn impressive by historical standards. History of Recessions in the United States.

The rebound in output comes at a time when the Federal Reserve is aggressively raising interest rates in hopes of slowing economic growth enough to contain decades-high inflation. The central bank has increased borrowing costs five times since March and is expected to do so again next week. The longer the labor market remains tight — and inflation persists — the more the Fed might have to raise rates higher and for longer, raising the chances of a recession. [Old school economic theory inapplicable to a post-pandemic economy.]

For now, though, hiring remains brisk and the unemployment rate, at 3.5 percent, is near historic lows. And although consumers are pulling back on some items — such as homes, cars and appliances — consumers are continuing to spend on travel and dining out, which is helping prop up the economy. [And restore balance to the economy.] Although business owners say they are worried about uncertainties ahead, many say they have yet to notice a marked slowdown in demand.

They are worried because of all the “nattering nabobs of negativity” doomsayers in the media dutifully parrot the GQP fear mongering over the economy. We hit peak inflation in June, and it is gradually coming down, albeit slower than anyone would like. But all the credible economic projections are that inflation will continue to decline back to pre-pandemic levels during 2023. We have to hope that the Fed, which is wedded to old school economic theory, doesn’t cause a recession with overly aggressive policies to throw people out of work.

And we must not elect Republicans to office who are committed to blowing up the economy and holding it hostage to a new round of austerity.

Statement by President Biden on Third Quarter GDP Report:

For months, doomsayers have been arguing that the US economy is in a recession and Congressional Republicans have been rooting for a downturn. But today we got further evidence that our economic recovery is continuing to power forward. This is a testament to the resilience of the American people. As I have said before, it is never a good bet to bet against the American people. Our economy has created 10 million jobs, unemployment is at a 50 year low, and U.S. manufacturing is booming. Today’s data shows that in the third quarter, Americans’ incomes were up and price increases in the economy came down.

Now, we need to make more progress on our top economic challenge: bringing down high prices for American families. Even with our historic economic recovery, gas prices are falling – down $1.26 since the summer, and down over the last three weeks. The most common price at gas stations in America today is $3.39 a gallon. That is progress, but we need to do more to bring other prices down as well. My Administration has passed laws that will bring down prescription drug prices and health insurance premiums starting next year. We must do more.

Congressional Republicans have a very different agenda – one that would drive up inflation and add to the deficit by cutting taxes for the wealthiest Americans and large corporations. It would raise the cost of prescription drugs, health care, and energy for American families. That failed economic vision is not the way to give families more breathing room and grow our economy so working families can get ahead.

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For months, doomsayers have been arguing that the US economy is in a recession and Congressional Republicans have been rooting for a downturn.

But with today’s Third Quarter GDP Report, we got further evidence that our economic recovery is continuing to power forward.

— President Biden (@POTUS) October 27, 2022

UPDATE: Key inflation gauge for the Fed rose 0.5% in September, in line with expectations:

An economic gauge that the Federal Reserve follows closely showed that inflation stayed strong in September but mostly within expectations, the Bureau of Economic Analysis reported Friday.

The core personal consumption expenditures price index increased 0.5% from the previous month and accelerated 5.1% over the past 12 months, the report showed. The monthly gain was in line with Dow Jones estimates, while the annual increase was slightly below the 5.2% forecast.

Including food and energy, PCE inflation rose 0.3% for the month and 6.2% on a yearly basis, the same as in August.

The BEA also reported that personal income increased 0.4% in September, one-tenth of a percentage point above the estimate. Spending as gauged through personal consumption expenditures increased 0.6%, more than the 0.4% estimate.

However, when adjusted for inflation, spending rose just 0.3%. Disposable personal income, or what is left after takes and other charges, rose 0.4% on the month but was flat on an inflation-adjusted basis.

A separate release Friday showed that employment cost rose 1.2%, in line with estimates, according to the Bureau of Labor Statistics.