[New York Diary] Approval Ratings in the 30% Range, Shouting "It's Not a U.S. Recession"

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[Asia Economy New York=Special Correspondent Joselgina] One of the debates that heated up the United States last week was about 'Recession.' This was due to the back-and-forth arguments before and after the release of indicators on whether the U.S., which recorded negative growth in the second quarter, has fallen into a recession. Typically, two consecutive quarters of negative growth are considered a 'technical recession.' According to this criterion, the U.S., which recorded an annualized GDP preliminary figure of -0.9% in the second quarter, meets the conditions for a technical recession following the first quarter (-1.6%).

The recession debate itself is a significant burden for U.S. President Joe Biden. Facing a struggling approval rating in the 30% range ahead of the November midterm elections, he needs to dispel the spreading fear of recession to at least revive the psychology of economic agents. This is why the president stepped forward both before and after the GDP announcement, saying, "This is not a recession," and "It is not surprising that the U.S. economy is slowing down," to alleviate concerns.

The White House had already engaged in a kind of public opinion battle since mid-month before the GDP announcement. A representative example is the blog post titled 'How Do Economists Determine a Recession?' posted on the White House website on the 21st. Starting with the sentence "What is a recession," the post argued, "Some claim that two consecutive quarters of negative real GDP growth constitute a recession, but this is neither the official definition nor the way economists evaluate the business cycle." It preemptively claimed that even if GDP declined in the second quarter following the first, it would not indicate a recession, aiming to capture public opinion in advance.

In the U.S., the National Bureau of Economic Research (NBER) examines the overall economic situation to officially determine whether a recession exists. According to the NBER, a recession is defined as "a significant decline in economic activity spread across the economy lasting more than a few months." The NBER, composed of eight economists, evaluates not only GDP but also eight major economic indicators including labor statistics, consumer spending, and industrial production.

Jeffrey Frankel, a professor at Harvard University's Kennedy School who served on the NBER Business Cycle Dating Committee from 1992 to 2019, explained in an earlier interview with Asia Economy that "a recession is not judged simply by whether GDP declines for two consecutive quarters." A representative example is the 2001 recession, which was declared despite growth rates fluctuating between positive and negative in consecutive quarters. This is also why Treasury Secretary Janet Yellen, ahead of the GDP announcement, stated, "If the NBER defines this period as a recession (even if negative growth is recorded), it would be surprising."

Currently, many economists side with the Biden administration. Various indicators, including the strong labor market, household income, and industrial growth, which are the administration's main arguments, are not bad at present. U.S. employment increased by 1.1 million in the second quarter, contrasting with the 240,000 job losses in the first three months of the previous recession. Additionally, the U.S. unemployment rate has remained at 3.6% for four consecutive months, close to a 50-year low. Although consumer spending, which accounts for two-thirds of the U.S. economy, is slowing, it still recorded a positive growth of 1.0% in the second quarter, which is considered one of the reasons why it is difficult to define the economy as having entered a recession.

Rather, Wall Street is wary of the possibility of a recession in the second half of this year or next year. Downside risks that had been feared are materializing faster than expected, and the Federal Reserve's tightening to reduce inflation is inevitably becoming a negative factor for economic growth. According to a recent CNBC survey, 63% of respondents answered "yes" to the question, "Do you think the Fed's efforts to reduce inflation will cause a recession?" The likelihood of a recession predicted by major investment banks and institutions is increasing monthly. The International Monetary Fund (IMF) also recently lowered its U.S. growth forecast for this year by 1.4 percentage points to 2.3% and warned of recession risks.

Regardless of whether a recession occurs, the current economic situation is itself bad news for President Biden ahead of the midterm elections. Soaring inflation shows little sign of easing despite the Fed's consecutive interest rate hikes, and rising living costs from gasoline to food are directly weakening his support base. According to a Quinnipiac University poll released in mid-month, President Biden's approval rating hit a record low of 31%.

Opposition to economic policies was particularly high by sector. Only 28% supported President Biden's economic policies. More than seven out of ten Americans opposed Biden's 2024 presidential run, and even more than half of Democratic supporters did not want him to seek re-election. Furthermore, in a Politico survey, the majority of Americans already responded that the U.S. economy is in a recession, indicating that the perceived economic situation has worsened significantly.

Now, even the 30% approval rating is precarious. There is no visible opportunity for President Biden to highlight economic achievements and rebound approval ratings before the midterm elections. After former President George H.W. Bush, known as 'Father Bush,' failed to win re-election, Bill Clinton's campaign slogan was "It's the economy, stupid."

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