Casey Mulligan, former chief economist for the Council of Economic Advisers (CEA), has criticized the Biden administration for trying to redefine what a recession is.
Several underlying indicators suggest the United States is heading for an economic slowdown despite President Biden’s insistence the economy is strong, said Mulligan – who served in the Trump administration between 2018 and 2019 — to FOX Business in an interview. In recent days, several senior White House officials have downplayed the technical definition of a recession and argued that two consecutive quarters of negative gross domestic product (GDP) growth does not indicate a recession.
“It seems to me that the White House seems to be saying, ‘yes, you work more and earn less, but at least you work more,'” said Mulligan, who is currently a professor at the University of Chicago. . “I don’t understand the silver lining of this. We are working to win. This part of the winnings is not going well.”
“It’s really GDP. GDP combines both labor income and capital income, but they tend to move together,” he continued. “We’ve seen it in the earnings data as well. Real wages, real earnings have come down a lot just over the last month as well as over the last year.”
Biden’s top White House economic advisers Brian Deese and Jared Bernstein, CEA Chair Cecilia Rouse and Treasury Secretary Janet Yellen all threw cold water on projections that the U.S. economy would enter a recession in the past few days. They pointed to strong job growth in recent months and the National Bureau of Economic Research’s definition of a recession.
“Considerable evidence suggests the economy is not currently in recession, including continued labor market strength, expanding industrial production and other estimates of economic growth that suggest rapid expansion,” two Treasury Department officials wrote in a blog post published Monday evening. .
The United States has created between 370,000 and 400,000 jobs every month since March after adding 714,000 jobs in February, according to Labor Department data. However, high inflation has reduced the wages of workers and led to a drop in consumption.
The debate over the definition of a recession comes ahead of the Bureau Economic Analysis’ advanced estimate of second-quarter GDP growth, which is expected to be released later this week. The GDPNow model projects GDP fell 1.6% in the second quarter, matching the decline in the first quarter and marking the second straight quarter of negative growth, the Federal Reserve Bank of Atlanta noted in a report last week. .
“It looks like following the first quarter there will be a very sharp reduction in productivity like we haven’t seen in a long time, maybe ever,” Mulligan told FOX Business. “We already know this in real wages. But the earning power of people, who work, has really diminished.”
“I think they’re a little premature to call victory over job growth,” he added. “Typically, when we see a reduction in productivity, we see a loss of jobs. Those job losses could happen within the next two to three months.”
Additionally, Michael Strain, director of economic policy studies at the American Enterprise Institute (AEI), noted in a tweet on Monday that a recession is officially declared whenever the economy experiences two consecutive quarters of negative GDP growth. since the 1950s.
Mickey Levy — chief economist for the Americas and Asia at Berenberg Capital Markets and a member of the Manhattan Institute’s Shadow Open Market Committee — said the economy was likely entering some kind of recession, but the depth of the slowdown is not was not yet clear.
“Things are clearly weakening, actually weakening towards a recession-like environment,” Levy told FOX Business in an interview. “That’s where I think we are now.”
“I think we’re heading into a shallow recession,” he continued. “But the difficulty right now is that it’s just unfolding, and we don’t have enough monthly data to back up the anecdotal evidence.”