Guest Contribution: “No, the US Is Not In Recession”

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy  School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version of this commentary appeared in Barron’s magazine, June 8, 2022. For a video interview, see BNN/Bloomberg, June 8. 

US consumer sentiment, by one measure, is at its lowest level since 2011. More Americans say they hear mostly negative news about the economy than hear positive news, or a balance of positive and negative.  Most notably, 57% tell pollsters they believe we are currently in recession versus only 21% who do not.

So, is the US economy already in a recession?  No.  People are unhappy with inflation, which has recently been running 8.3 % [CPI change, from April 2021 to April 2022].  That is the highest since 1982.  But inflation is not recession. Recession is defined as a significant decline in economic activity.  Economic activity is not falling. Quite the contrary: it has been booming.

Most diligent readers of Econbrowser are probably already aware of the facts.  But it is worth spelling the evidence out.

  1. Is GDP falling?

In many countries, a recession is defined as two consecutive quarters of negative GDP growth.  In the United States, the official arbiter of recessions is the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), a private non-profit research organization.  The NBER committee does not use any mechanical rule.

What does the NBER committee look at to decide if there has been a significant decline in economic activity?  The most important criterion is whether there has been a decrease in national output [Gross Domestic Output].  GDP has risen rapidly since the start of 2021, at 4 % per annum, averaging over the five quarters.

In addition to GDP, the NBER also looks at a second measure of national output, called GDI.[1]  The most recent data indicate that output rose slightly in the first quarter of 2022 at about 0.3% per annum.  [This is the average of GDP growth, at -1.5 % per annum, and GDI growth, at +2.1% — both reported on May 26, by the US BEA.]

There is no reason to think that growth is now turning negative.  Indeed, domestic demand has continued strong, including in the first quarter, making it likely that the expansion is now continuing in the second quarter.

  1. Other indicators of recession

The second most important criterion of recession is the state of the labor market. Here, employment is traditionally the primary indicator.  But other relevant measures of whether the labor market is tight or loose include: the unemployment rate, the ratio of employment to population, and job vacancies.  By virtually all such measures, the labor market is booming.  The unemployment rate is 3.6%, close to the lowest it has been in 50 years. There are currently almost 2.0 job vacancies for every unemployed worker, the highest that ratio has been since the data were first collected.

The start of a recession is marked by a peak in the business cycle.  To pinpoint the precise month of a turning point, the NBER Committee also looks at other indicators, including real personal income less transfers, real personal consumption expenditures, real sales and industrial production. Like national output and employment, these measures do not currently suggest a downturn (see these and other series depicted here).

At some point there will be another recession.  But the odds that it will hit the US this year are nowhere near as high as people seem to think.  In a random year, the odds are about 15%.  Currently they are higher than that. But not much.

To be sure, there are serious risks internationally.  The EU economy will be negatively impacted by cuts in imports of Russian oil and gas. China’s economy will be negatively impacted by shutdowns in pursuit of zero Covid.  Emerging Market economies will be negatively impacted by rising global interest rates and a stronger dollar.  These could all have spillover effects.

  1. But what about inflation?

Does the high level of US inflation make a recession likely?  There is a sense in which inflation and recession are opposite conditions.  The factors that drove the strong economic recovery, following the Covid-19 recession of early 2020, also drove inflation up.  They included expansionary monetary policy by the Fed and expansionary fiscal policy by the White House and Congress, mostly transfers that boosted households’ disposable income (some of which they saved and are spending this year, after the programs have run out).  These factors boosted demand in 2020 and 2021.

In light of the ensuing inflation, macroeconomic stimulus was probably excessive.  Still, it is good that we were able to bring unemployment down below 4% in less than two years, from 14.7 % in April 2020.  We are much better off than we were after the Great Recession of 2007-09, when fiscal stimulus was too little and too short-lived, with the result that it took nine years to bring unemployment down below 4 %.

One often reads that inflation induces consumers to cut spending. But the effect is more likely to be the reverse.  Inflation is defined, not as a one-time increase in prices, but as an ongoing upward trend in the price level.  When inflation is high, households and firms often spend more, reacting to the likelihood that goods prices will be even higher tomorrow than they are today.

It is certainly true that not all of the current inflation can be attributed to expanding demand.  Supply chain disruptions and increases in global prices for oil and other commodities have pushed inflation up as well.

There is indeed a sense in which high inflation can lead to recession.  Sooner or later, the central bank has to raise interest rates in order to restrain demand and bring inflation down to a sustainable level, like 2 %.  It is tricky to pull this off without a recession.  That is the main reason why a downturn at some point in the next two years is more likely than usual.  The Fed has raised the short-term interest rate by 0.75 percentage points since February, and has indicated that it will continue the tightening trend.

But the interest rate has a long way to go.  For 2022, monetary policy still counts as easy.  For now, economic activity will probably continue to expand.

[1] US GDP is measured by adding up components of expenditure, like consumption, while GDI, or gross domestic income, is measured by adding up sources of income, like employee compensation. In theory, GDP should precisely equal GDI; but in practice they differ due to a statistical discrepancy.  Experts consider an average of the two output measures to be a better indicator than the GDP measure alone.


This post written by Jeffrey Frankel.

48 thoughts on “Guest Contribution: “No, the US Is Not In Recession”

  1. pgl

    “Most diligent readers of Econbrowser are probably already aware of the facts.”

    Well that excludes the Usual Suspects. Aka

    (1) Bruce Hall whose sole purpose in life is tell anyone who would listen – the world is coming to an end because of BIDEN;

    (2) Princeton Steve who sees high oil prices which in his “suppression” model (whatever that is) must mean recession as oil is the only thing that matters.

    Now I would hope these two will carefully read this informative post – but we all know they will not.

    1. Moses Herzog

      I always learn something new and worthwhile when reading Professor Frankel. So, aware of “some” facts, yeah, but always something extra to be gleaned from reading Prof Frankel. We are the beneficiaries of the collegial friends Menzie has collected over the years.

  2. Moses Herzog

    Barron’s was a great publication when I was in my teens, used to love reading it. Not sure it has the cachet it used to. I read something the other day that now Forbes only comes out with 7–9 hardcopy issues per year now. No wonder I can’t find them at bookstores anymore. Damn. They’re making Uncle Moses feel old again.

  3. ltr

    June 9, 2022

    Jump in Mortgage Rates Could Add $100,000 to Housing Costs
    With interest rates at 5 percent, borrowers could pay thousands in extra costs over the lifetime of a 30-year home loan, a report shows.
    By Gregory Schmidt

    The recent rise in U.S. mortgage rates could bump up the average mortgage payment by hundreds of dollars each month, potentially adding more than $100,000 in costs over the lifetime of a typical loan, a new study shows.

    The report, compiled by the online lending marketplace LendingTree, compared the average monthly payments on 30-year, fixed-rate mortgages across the nation in January, when the average rate was 3.79 percent, and April, when it hit 5.25 percent. It found that in states where housing prices were the highest, new borrowers could expect to see bigger increases in costs.

    In California, for instance, home buyers paid an extra $407 a month. The monthly increase was $357 in Washington and $337 in Massachusetts. These extra monthly costs add up to an average of $132,167 over a 30-year loan, according to the report.

    The study found that states with the lowest monthly increases were Ohio ($200), West Virginia ($201) and Kentucky ($202), totaling an average of $72,317 in extra costs over 30 years….

    1. ltr

      Shiller looked at American home prices from 1890 on, and found a remarkable long term stability. Home prices tended to track the inflation over the decades. However, from about 1996 on, real home prices have increased as never before. I find this change in tendency puzzling, not worrisome just puzzling. Shiller thinks home prices are excessive, but I am not sure why since the decades of relative stability are not convincing to me.

      1. pgl

        Please tell us that you have not been listening to the know nothing Princeton Steve. The cost of capital has declined dramatically since 1996 which would tend to increase valuations relative to cash flows (in housing think real rents). And you yourself using FRED has shown real rents have increased.

        So higher housing values is predicted by basic financial economics. Yea I get Princeton Steve is too thick headed to get this but you are way smarter than he will ever be.

  4. pgl

    Abbott knew about potential safety issues in its baby formula plant as early as Feb. 2021. Apparently they did little about this and did not tell the FDA. This is criminal. Maybe Abbott should be forced to get out of the baby formula business letting a responsible company to take over this operation.

  5. JohnH

    Interesting pieces in the news media. The first is for all those economists who know nothing about the Russian economy but we’re eager to promote a doomsday narrative resulting from NATO’s economic war on Russia: “ Russia is winning the economic war” —Larry Elliott, The Guardian’s economic editor.

    Of course those very same propagandists could not imagine that there could possibly be any blowback or cost to Americans stemming from the US’ economic war. And here we are with increasing energy costs, wheat shortages, and stagflation. Of course, these very same economists can’t imagine that Corporate America, the very folks who set prices, could possibly get opportunistic and greedy enough to contribute to inflation and exacerbate it!

    1. pgl

      Gee JohH – your own Putin apologist did manage this bit of honesty:

      Putin has rightly been condemned for “weaponising” food

      Of course in your world Putin is the hero and those Ukrainians all deserve to be killed.

      1. Noneconomist

        Expect JohnH to claim western media misquoted Putin. That he was really following in the footsteps of great American warriors like Grant, Sherman, and Sheridan. Men whose lone aim was to return territory to the country as a whole.. And that his greatest desire was to be Lincolnesque in Ukraine showing malice toward none, charity to all. That’s our John, truth loving patriot to the core.

  6. JohnH

    And for pgl and Rosser, who were eager to condemn Russia for any and all unverified allegations of atrocities and war crimes, the bloodier and more sensational, the better: “ Official Behind Media Reports of Russian Atrocities Fired By Ukrainian Parliament.” The stories were trumped up!

    It’s time people grew up and acknowledged that in wars, the first casualty is the truth. Ukraine was peddling a lot of propaganda and winning the infowar…and they had eager megaphones in the Infotainment media ready to gobble it up and rebroadcast it, unverified and often unsourced.

    So I guess that pgl and Rosser can’t be blamed for regurgitating everything they read. As we well know, promoting US-sanctioned propaganda is no crime.

    1. Barkley Rosser

      Oh gag, our most awful Putin troll, JohnH, is back with efforts to whitewash Putin’s war crimes.

      So it looks like some claims about those war crimes were exaggerated, apparently in particular some claims about rapes of children. But the main facts of thousands of Ukrainian civilians killed for no justifiable reason whatsoever remain completely in place. Sorry, JohnH, you are still defending war crimes and are utterly disgusting as a result.

      As for your claim that nobody expects “blowback,” I note that when the war started and the US acted to impose sanctions on Russia, President Biden openly noted to the world and the US public that this would lead to higher oil and gasoline prices. Anybody who claims they did not know this would be the result is an ignorant fool or a liar.

      1. pgl

        “Anybody who claims they did not know this would be the result is an ignorant fool or a liar.”

        Even people back in the EconomistView days knew JohnH is both a fool and a liar.

      2. JohnH

        Barkley is vehemently opposed to war crimes, both real and imagined, but only those perpetrated by US enemies. As for those perpetrated by the US, such as the droning of wedding parties and funeral processions in Afghanistan, Barkeley was content to remain silent. Situational morality, propagandists’ specialty.

        1. pgl

          “Barkley is vehemently opposed to war crimes, both real and imagined, but only those perpetrated by US enemies.”

          You are nothing more than a disgusting little liar. I’m sure he protested against Vietnam. I know I did. You did not. Barkley and I both strongly opposed that 2003 invasion of Iraq. I do not recall you at any blog back in those days doing so.

          Look – when you get called out on being pathetic – which you are – doubling down with such disgusting little lies does not help.

          1. Barkley Rosser

            Yes, I opposed both the war in Vietnam and the invasion of Iraq from the beginning. Got tear gassed pretty badly several times back in the Vietnam days, and nearly run over by an armored vehicle once.

        2. Barkley Rosser


          I have opposed those drone attacks. Have done so on Econospeak. But I have not done so lately and did not do so on a regular basis. It seems that they have been cut back recently.

          I have made more noise about US supporting Saudi attacks on civilians in Yemen, which Biden cut back, and now it looks that there is a cease fire holding. Probably only worthwhile thing that might come out of Biden’s likely forthcoming trip to KSA is that the awful war in Yemen might edn.

          1. Barkley Rosser

            However, JohnH, you seem to be openly supporting this invasion of Ukraine by Russia and attempting to cover up the war crimes being committed, which involve far greater numbers than anything done by US with drone attacks anywhere ever.

        1. pgl

          “They all warned that Trump was campaigning on a platform of xenophobia, homophobia and demagoguery, but as soon as he was elected they began launching phony Russiagate attacks which themselves were rife with xenophobia, homophobia and demagoguery.”

          Oh no – Trump is a fine upstanding Christian who never took aid from Putin in the 2016 elections! This woman has ZERO credibility.

          1. Barkley Rosser

            The Mueller Report, not to mention all the Trump advisers in jail for lying to the FBI about their dealings with Russia, show that “Russiagate” was not phony. Indeed, this reporter has a credibility problem, although it is quite likely that at least some war crimes chaeges the Ukrainians have made may turn out not to be correct. But as I already noted, even if a couple of these rape claims turn out not to be true, there remain thousands of civilians dead who should not be. There is no getting around all that, and claiming he is Peter the Great reborn does not remotely justify any of this. Heck, this is him admitting his “Anti-Nazi” story was just a pretext. This is just pure Eurasianist imperalism.

    2. pgl

      “And for pgl and Rosser, who were eager to condemn Russia for any and all unverified allegations of atrocities and war crimes”

      Ah Johnny boy – have you not noticed most people here realize there are war crimes. For you to dismiss them as mere allegations only shows how utterly disgusting your defense of Putin the pig has really become. No – it is you that is eager to see innocent Ukrainians die for the glory of mother Russia.

      1. JohnH

        “Most people here realize that there are war crimes.” Yes, Russia is probably committing war crimes…just like the US did in its pointless and future military interventions over the years. Why single out Putin for bad behavior, when there’s plenty of blame to go around?

        1. pgl

          “Yes, Russia is probably committing war crimes”

          Probably? Definitely! And JohnH is going out of his way to support this war criminal often repeating Putin’s false allegations. Look pathetic little troll – everyone gets your dishonest game. Go and inflict some other blog with your poison. Damn!

        2. pgl

          “Why single out Putin for bad behavior, when there’s plenty of blame to go around?”

          So Biden invaded Ukraine? You are one boring moron.

        3. Barkley Rosser


          Because he is the one freshly committing them on a massive scale right now, thousands and thousands dying as we write. There is nothing else remotely on this scale going on anywhere else in the world right now, and it is utterly without a shred of justification. That is why.

          Hey, at least with those botched drone attacks, the US was trying to get at actual terrorists who, you know, killed several thousand people in the US back on 9/11. If you want to tell us Putin is trying to get at Nazis who killed Russians in WW II, you are lying yet again, or just being foolish.

        4. Noneconomist

          Probably? OK, you are the same guy who said we should not believe anything the government says or trust any of the hundred of media outlets or the thousands of correspondents in Ukraine. All of them are lying, which you know because you’re you.
          Youfollowed that by denying any Russian bad deeds in Mariupol, advising we wait until the Pentagon {apparently the Pentagon located in Caracas), determined the accuracy of such claims.
          You can’t believe the government, but you can believe the Pentagon?
          And you topped that with remarks re: unverified claims of atrocities. Well, shouldn’t you claim ANY atrocities since including “unverified” would clearly suggest there are indeed claims that can be verified?
          You continue to secure your place in this blog’s Hall of Liars , and you remain its number one Putin apologist.
          The honor is all yours.

  7. New Deal democrat

    The problem with this analysis is that there have been recessions even when the Fed did not raise rates, and there was no inverted yield curve. Most particularly, the first two recessions after the end of World War 2.

    In those two cases, the Fed never raised short term rates. The yield curve never inverted. And yet, inflation rose to 20% in the first case and nearly 10% in the second:
    The relationship of the three is shown in the graph linked to above.

    What happened? Prices rose faster than the ability of consumers to make payments. Additionally, mortgage rates rose enough to crimp the ability of prospective home buyers to make mortgage payments.

    If that sounds familiar, it is because similar dynamics are taking place with regard to houses and cars.

    If consumers cannot afford increased down payments and monthly installments, they will cut back and cause a recession whether or not the Fed raises rates.

    1. Ian Fellows

      Additionally, sure, the fed rate is low now, but forward guidance has raise long term rates considerably. It is the increase in those long term rates that put pressure on the economy.

      I’m not saying that we are currently in a recession, but I would note that this post has the potential to age very poorly. When the NBER marks the start of a recession, they pick the cycle highpoint as the beginning. At that point, everything almost always looks pretty okay in the GDP/employment/spending/income department. It is only the leading indicators that have turned, as many of them have now (I don’t have to tell you., NDD).

      1. Moses Herzog

        @ Ian Fellows
        I think you bring up an interesting point (some might say an “obvious” point, but still interesting in the current context) . I saw in another recent blog thread Rosser Junior playing his usual know it all role where he was arguing with himself on if unemployment was a concurrent indicator or latent indicator. Here is my question/observation which I would LOVE for Menzie to give his perspective on, and yourself if you care to. Is unemployment really a “latent indicator” in >LIVE time?? That is to say, if we are still arguing in live time whether there is a recession or not, and are still “looking to” the weekly unemployment insurance claims to tell us whether we are in a recession or not, does that unemployment number become a “latent” indicator, just because the BEA shifted the time back on the recession on the 20/20 hindsight?? I would argue, I’m not certain that’s the case, if in LIVE time we were still debating the matter.

        1. Barkley Rosser


          It is generally accepted that unemployment is a lagging indicator, even though macroduck argued it might be a leading one. “Latent” indicator is about as meaningful a concept as Steven Kopits’s “suppression,” which we are supposed to read off some graph.

          1. New Deal democrat

            The unemployment rate is an unusually negatively sensitive indicator. It leads going into recessions and lags coming out.

            Initial unemployment claims are a short leading indicator. There is no reasonable debate about this.

          2. Moses Herzog

            Watch out New Deal Democrat, your pointing out Barkley Junior’s blanket statement on unemployment numbers makes Barkley wrong. That is unacceptable to His Juniorness and a wrath of the keyboard version of hot moist air signifying nearly nothing will be upon you.

            Bad boy, bad boy, what you gonna do, what you gonna do when narcissist’s on you.

          3. Moses Herzog

            Just as an aside, as I was reading many orthodox economists (including those who work as private forecasters) discuss how they look at initial jobless claims as an indicator for recessions~~NBER is the outfit that decides the starting and endpoint for recessions, is it not?? Your Supreme Juniorness, can you tell us how many years you have been a member in NBER now??

        2. Barkley Rosser


          Um, I just noticed that you are claiming that i discussed whether unemployment was a “latent” or coincident indicator. I think you are yet again misquoting and misrepresenting me, which you repeatedly do. Above I discussed if it was a “leading” or coincident (or lagging, actually, which some say it is) indicartor. I was disagreeing with macroduck’s claim that it is a leading indicator. I know you admire him a lot, and I think he is mostly right about most stuff. But I disagreed with him and said it is either a coincident or lagging indicator.

          I do not think I said anywhere anything about unemployment as a “latent” anything, although maybe I did. If I did, I did not mean todo so. View that as meaningless basically.

          1. Moses Herzog

            @ Barkley Junior
            NBER is the outfit that “officially” declares recession starting points and end times. I missed where you said it Junior~~How many years did you say you were a member of NBER again??

            I’ve read many private economists who use initial jobless claims as a leading indicator on recessions. Maybe Barkley was too busy playing 007 super spy for Saudi Arabia?? Head of Putin war propaganda for the state of Virginia?? I have no idea at this point.

            Barkley, I might add, it’s pretty difficult to “misquote” someone when you regularly copy/paste their own comments with the link about 2 inches below the comment they claim they “never said that”. I wish to God you’d return the favor, but I’ll let the readers here deduce why you “can’t” reciprocate by linking back to my comments when you “quote” me. I think the average intelligence and above here “get” why you “can’t” do that.

  8. TedA

    Two things:
    1. “When inflation is high, households and firms often spend more, reacting to the likelihood that goods prices will be even higher tomorrow than they are today.”

    Well, at least on the big-ticket items, most people I know would wait for inflation to cool and prices to return to reasonable levels. When confronted with high gas prices, they cut down on travel. So do you have any past studies of consumer behavior to make this point?

    2. You are focusing only on the slowly rising interest rate, but not on the quantitative tightening by the Fed. The latter will cause the market bubbles to burst, defaults to rise, and the chance of a black swan event to rise as well. All of that can lead to a recession as well.

    I don’t think many are arguing we are already in a recession, but there is a high likelihood of stagflation and eventual recession in late 2022/early 2023.

  9. Barkley Rosser

    I agree with pretty much everything Jeffrey Frankel wrote here, with the possible exception that he may have understated slightly the danger of supply side problems leading to a recession, although he certainly recognizes the possibility.

    I note as an off-topic matter that his colleague, Dale Jorgenson, has just died at age either 88 or 89. Many people thought he deserved the Nobel Prize, but he did not and now will not.

    1. Moses Herzog

      The American consumer has exponentially more pricing power than they are ever aware of. That is, if they ever decide not to be functionally illiterate and use that power. Oh well, there’s always bad products on 2:00am TV and “magical” MyPillows to be had, bad American brand cars. Why buy Japanese cars that only have to be serviced once every 5 years, and pay 1/6th the cost on gasoline?? Why enjoy life anyway?? It’s so much funner sitting in your own dung and blaming Democrats for all your problems. Carry on people.

    2. pgl

      Are we sure they are not just getting rid of those rotting avocados that Princeton Steve uses in his gourmet recipes?

    3. pgl

      “Sales of big TVs and small kitchen appliances that Americans loaded up on during the pandemic have faded, leaving Target with a bloated inventory that it said must be marked down to sell.”

      I should go out and buy a new TV and add to my assortment of cooking ware.

      1. Moses Herzog

        Although I have seen some cheap priced electronics there in the past, it’s hard to believe a “markdown” at Target adds up to anything more than regular prices at better stores. Kind of like the infamous and perennial Macy’s “40% off sale”. 40% off WHAT original price?? They never want to discuss that one.

      2. Ivan

        What really surprise me is that they have so little ability to predict consumption that they constantly end up with costly surprises of either over or undersupply. If it takes half a year from you make the order to the product is in stores I can see the difficulty of responding to unpredictable events. But its is mind-blowing that automakers couldn’t see the chip shortage coming from miles away. How could they allow some cost cutting beancounter to make such a costly blunder. All they had to do was understanding that eventually the cars would be needed and they should continue to purchase chips at the usual rate (and just store them).

        Someone should do a study of how expensive the “just-in-time” and “supply lines circling the earth” concepts are for businesses. Leaving profits on the table because you cannot get the product from far away and don’t have any warehouse inventory is very costly both short- and long-term.

        1. Moses Herzog

          @ Ivan
          Let me explain to you what counts as “free market efficiencies” (or that’s what Republicans like Rand Paul label them anyway) counts for in the year 2022, and arguably since about 1982: “Oops, guess we’re going to have to raise the price AGAIN. Oh damn, did I just say that??” [ clears throat awkwardly, grabs his cue card by his executive’s desk. Reads super large text on card in Amber Heard B-acting voice ] “oh darn, oh damn, oh geez, shoot my mother, we are going to have to pass the cost onto the consumer.” [ break out into Amber Heard mode crying here, hold tissue up to your completely dry face. ] “I am so melancholy now.” [ End interview here, before the general public figure out you said this same thing the last 40 years, and you are a FRAUD. If pressed hard for follow up question, tie-in global inflation with “Biden and the Jewish cabal” and press the button for escape exit door ]

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