It’s possible: CBO director admits that the economy may be already in recession

The Congressional Budget Office (CBO), sent a letter to Sen. Lindsey Graham, a Republican from South Carolina on Thursday.

The letter of the CBO is an answer to several questions Graham (the Senate’s Budget Committee member) had asked following Wednesday’s cost estimate report. 5376, the Inflation Reduction Act of 2022, according to the letter’s text. Graham was concerned about whether the economy has entered recession. The CBO responded that it was not possible to know, but that it is plausible that the economy is in recession.

The U.S. economy has shown signs of slowing but it is hard to know if the economy is in recession. It is possible that it will be apparent in retrospect that the U.S. economy entered recession sometime in the year

So the Fed’s Powell, and the CBO’s Swagel, are both “maybe, maybe not”. They seem to have no clue whether or not the US is currently in recession despite two consecutive quarters of falling GDP.

— Jonathan Nicholson (@JNicholsonInDC) August 4, 2022

While many are familiar with the shorthand definition of recession being two consecutive quarters of declining GDP, the organization that classifies when a recession has begun, the National Bureau of Economic Research (NBER), does so conservatively and retroactively by looking at a number of different indicators ranging from employment data, to consumption, investment, and more, according to the Bureau’s website.

The committee uses a retrospective approach when deciding the turning points. It waits for sufficient data to make its peak-trough announcements so that it doesn’t have to revise the business cycle chronology. According to the NBER website, the NBER waits to determine the peak of activity until they are certain that there has been a recession.

While some metrics certainly indicate a decline in economic activity in the first half of 2022, there is not yet an overwhelming preponderance of evidence to suggest that the economy is in a recession since factors like a strong labor market cloud the economic outlook, according to the CBO’s letter.

President Joe Biden was criticized for making semantic games regarding whether or not the economy is in recession. However, many Americans are struggling financially.

Graham’s office didn’t immediately reply to Daily Caller News Foundation.

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