Few factors have more sway over voters than the state of the economy. Good economic news functions as an implicit but powerful endorsement of incumbents, while negative news, like a recession, is equally condemning. But any news is subject to political spin, including the economic variety.
The National Bureau of Economic Research (NBER), a private nonprofit, has taken upon itself the task of dating recessions, but the organization’s timing can have political consequences. The NBER waited until the month after the 1992 election to announce that a recession had actually ended 21 months beforehand. That delay gave the Clinton campaign a political cudgel to successfully beat the incumbent, who had supposedly presided over a three-year recession.
Today’s White House claims there is no recession because the NBER has yet to announce it. While determining a recession’s beginning and end is by nature a backward-looking task, as data continue piling up, the NBER’s delay looks less economic and increasingly political with the midterm elections bearing down on the nation.
Using the last 75 years as context, the economy has contracted for two consecutive quarters nine times, and each was declared a recession. In addition to those nine contractions, there have been three occasions when the economy did not contract for two consecutive quarters, but those periods were dated as recessions too.
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So, two consecutive quarters of negative growth isn’t a necessary condition for marking a recession, but is a sufficient one.
The NBER looks at three metrics when dating recessions: diffusion (how widespread), depth (how severe) and duration (how long). But even these are not hard and fast requirements, as was the case in 2020.
The recession caused by the government-imposed lockdowns was dated by the NBER as lasting just two months, the shortest on record, and an insufficient duration to be considered a recession. However, the economic decline was so widespread and so steep—unprecedentedly so—that the NBER still considered it a recession, and rightly so.
Today, the economy has clearly contracted. There are myriad economic indicators pointing to recession and although the White House is quick to cite nonfarm payrolls and a low unemployment rate as the only two data points in their favor, even those figures do not stand up to scrutiny.
The non-farm payroll number is one of two measurements for the total number of jobs in the country contained in the monthly report from the Labor Department. But the second measurement, from a survey of households, actually peaked in March—below pre-pandemic levels—and has been trending down since then.
And the much-vaunted unemployment rate is so low because labor force participation has dropped precipitously after dropping welfare work requirements, removing millions from the labor market, and artificially driving down the unemployment rate.
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Meanwhile, average real wages are down, homeownership affordability has collapsed, inflation remains high, businesses are scaling back hiring, manufacturers are receiving fewer orders, the housing market is contracting, and GDP has shrunk. Those are just a handful of the plethora of evidence which says we are now in the 13th recession of the last three-quarters of a century.
Denying this reality is denying the truth. But just as the truth has consequences, including political ones, so denying the truth can have the allure of avoiding, or at least delaying, those consequences. There is obviously a strong political incentive for any Biden loyalists at the NBER to avoid confirming this recession until after the midterm elections have passed.
Doing so would not merely be ignorant of the facts, but also unethical. It is reminiscent of the old saying: justice delayed is justice denied.