Republicans say economy is in recession after half a million jobs were added in July


WASHINGTON For the past month, Republicans have maintained that the US economy is in a recession, a period of reduced economic activity that could be politically devastating to the party in power.

Then, on Friday, the U.S. Department of Labor announced that the economy added half a million jobs last month, pushing the national unemployment rate to 3.5% — nearly as low as it has ever been, and a strong indication that the economy is not, in fact, in recession.

Still, at a news conference on Friday, where they overturned Democrats’ plans to pass a major domestic policy bill, Republicans insisted that a recession is underway.

“We are in a recession and this [bill] is going to make it worse,” said Senator Lindsey Graham (RS.C.).

The Switzerland Times asked the five Republican senators on the press how July job growth could happen in a recession. sen. Bill Cassidy (R-La.) pointed out that the US saw negative growth in gross domestic product in the first and second quarters of the year, a key economic metric.

“The definition of recession is negative GDP growth in two consecutive quarters,” Cassidy said.

But economists don’t use a simple rule of thumb to find out when the economy is in recession — they follow the regulations of the National Bureau of Economic Research, a private nonprofit that has been operating since the 1960s.

The NBER describes a recession as “a significant decline in economic activity” spread across several industries. Quarterly GDP is a factor, but the most important measures are personal income and payroll employment. Those stats both show growth.

In a “FAQ” page on her website, the NBER explicitly rejects the two-quarters definition, stating that “GDP could decline by relatively small amounts in two consecutive quarters without justifying the finding” that economic activity had peaked and started to decline. The GDP measurements this year saw a modest decline for somewhat technical reasons, such as a decline in corporate investment in private inventories.

Now, just because there is strong job growth doesn’t mean people should be happy with the economy. Consumer prices have risen at the fastest pace in decades, including 9.1% in June. Consumers in particular have been plagued by volatile food and gas prices, and consumer confidence, as measured by surveys, has been remarkably low. Polls also show that voters believe the economy is in recession, and Republicans want those voters on their side.

“I’m very happy that we have strong job growth, but we are in a recession,” Cassidy said.

At the same time, some voters who tell polls that they think the economy is in recession may be saying this because they’ve heard Republicans say it so many times on TV. Since a bad economy could benefit Republicans in the November election, they have an incentive to paint as bad a picture as possible, and less incentive to paint a more nuanced, truthful picture.

sen. Roger Marshall (R-Kan.) offered his own recession stat: “To me, recession is when I go back home and the community bankers say, ‘Hey, Doc, what’s going on? Business slows down. Why are people afraid to invest?’”

sen. John Barrasso (R-Wyo.) noted that employment rates are still below pre-pandemic levels. “And when you talk to families, they have a harder and harder time keeping up,” he said.

Graham suggested that questioning his economic analysis amounted to media bias against Republicans. “If a Republican was in charge, you wouldn’t be asking that question,” he said.

Graham, in particular, should know that economic data does not unequivocally point to a recession. In response to a question from the South Carolina Republican this week, the head of the Congressional Budget Office — an economist named Phillip Swagel — told him it too early to say there is a recession.

“It’s possible in retrospect that the economy slipped into recession sometime this year,” Swagel wrote. “However, that is not apparent from data available at the beginning of August.”



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