Treasury Secretary Janet Yellen said Sunday that the U.S. economy is not necessarily headed for a recession even if the gross domestic product experiences two consecutive quarters of decline.
Appearing on NBC’s “Meet the Press,” Yellen acknowledged that many economists generally define a recession as two consecutive quarters of negative GDP growth but emphasized, “That is not the technical definition.”
“There is a ton of data coming out this week; it’s probably a fun week for an economist because we are going to have consumer confidence survey, inflation numbers for June,” host Chuck Todd said. “Which is the indicator? What’s the number you’re most focused on that will give you a better indication of where this economy is headed?”
“Well, I look at all the data, and GDP will be closely watched,” Yellen replied. “A common definition of recession is two negative quarters of GDP growth, or at least that’s something that’s been true in past recessions. When we have seen that, there has usually been a recession. And many economists expect second-quarter GDP to be negative. First-quarter GDP was negative. So we could see that happen, and that will be closely watched. But I do want to emphasize: what a recession really means is a broad-based contraction in the economy. And even if that number is negative, we are not in a recession now, and I would, you know, warn that we should be not characterizing that as a recession.”
“I understand that, but you’re splitting hairs,” Todd challenged. “If the technical definition is two-quarters of contraction, you’re saying that’s not a recession?”
“That’s not the technical definition,” Yellen retorted. “There is an organization called the National Bureau of Economic Research that looks at a broad range of data in deciding whether or not there is a recession. And most of the data that they look at right now continues to be strong. I would be amazed if the NBER would declare this period to be a recession, even if it happens to have two-quarters of negative growth.”
According to Forbes, economist Julius Shiskin created several “rules of thumb” to help identify a recession in 1974; the most popular, which became the standard definition, was two consecutive quarters of declining GDP. But the National Bureau of Economic Research (NBER) has its own criteria for determining a recession, which is: “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
NBER, a nonprofit, is “generally recognized” as the body that defines the beginning and end of recessions in the United States, according to the outlet.
