When I took economics in college, the definition of a recession was two consecutive quarters of negative growth/declining Gross Domestic Product (GDP). Yesterday, the US posted a 0.9% shrinkage in the GDP for the second quarter (April through June) of 2022. The first quarter (January through March) saw a 1.6% shrinkage in the GDP. Ipso facto: recession. Of course, this is a terrible time for a recession. The midterms are just around the corner and the growth numbers for the third quarter (July through September) won't be released until shortly before the election on November 8th. Even if the economy rebounds, the voters are thinking about recession as they ponder their upcoming vote; that is never good for the incumbents.
In 1992, George Bush was running for re-election and the economy looked weak. His opponent, Bill Clinton, proclaimed it the worst economy since Herbert Hoover and rode the slogan "It's the economy, stupid" to the White House. In fact, the economy was in recovery throughout 1992, the recession having taken place in 1991:
With this history, no one wants to have a recession with the election so near. Therefore, the plan has rolled out to redefine recession. President Biden has stated that "Both [Federal Reserve] Chairman Powell and many of the significant banking personnel and economist say we're not in recession." Rather than the traditional definition of recession, the administration has shifted to the Sahm Rule.
Sahm Recession Indicator signals the start of a recession when the three-month moving average of the national unemployment rate (U3) rises by 0.50 percentage points or more relative to its low during the previous 12 months.
By this metric, the US is not in recession. Ergo, the administration has decided this is the correct method for determining if we are in a recession.
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