In the not-too-distant future there are going to be countless books written about the economy of the era I'm tentatively dubbing the Stupid 20s.
Chapter 1: Covid.
Chapter 2: Supply chains.
Chapter 3: Inflation.
Chapter 4: Recession (?)
...
Chapter 38: It's 2028 And We Can All Take a Deep Breath Now. All Hail President Beyoncé.
Anyway, point is, stuff's real weird right now — economically, politically, culturally. But you signed up for a business newsletter, so we're going to gloss over those latter two subjects and focus on our Decidedly Weird Economy.
Here's the deal: Even the world's foremost economists are scratching their heads right now. Why are consumers spending so much money but saying they're pessimistic? How can the labor market be so strong while output is dropping? Are we in a recession, or headed for one, and honestly how are we even defining "recession" these days?
"If you're not a little confused about the economy, you're not paying attention," tweeted Jason Furman, a former White House economic adviser.
In short: No one knows what's going on, primarily because the pandemic took a wrecking ball not only to the economy itself but to the models that economists have spent decades developing to try to measure and report on, well, everything.
In the absence of certainty, speculation is running wild. That has some experts worried we'll actually end up talking ourselves into a recession.
Hear me out: There's a pretty sound theory that the more we talk about the R-word, the more likely it is we'll end up in one. It's kinda like skiing down a mountain — the more you worry about running into a tree the more likely you are to bonk into one.
Even a casual reader of news — or Twitter or Instagram or TikTok — is, consciously or not, soaking up concerns about inflation and a looming recession. When that unease takes root, it changes the way we spend.
If we believe rampant inflation is here to stay, we'll lock in purchases sooner than later, which translates to higher demand and therefore higher prices ... and so on. If we believe a recession is inevitable, then it hardly matters whether it's technically a recession or not. When the vibe is off, the vibe is off.
The White House is already trying to get ahead of potential bad news on the economic front this week, when the Commerce Department releases its initial report on second-quarter growth. In a blog post last week, officials sought to reinforce the idea that the definition of a recession isn't as clear cut as you might think.
"While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle," the White House wrote. "Instead, both official determinations of recessions and economists' assessment of economic activity are based on a holistic look at the data — including the labor market, consumer and business spending, industrial production, and incomes."
Translation: Even if the second-quarter data shows another contraction, that doesn't automatically make it a recession. This is more than just a politically convenient fact for the Biden administration. In the United States, there's an obscure cadre of eight economists who are in charge of declaring when we're in a recession. And as my colleague Nicole Goodkind wrote recently, that group of eight known as the Business Cycle Dating Committee — which sounds like the worst matchmaking app of all time — abides by a relatively vague definition that allows for wiggle room: A recession, they write, "involves a significant decline in economic activity that is spread across the economy and lasts more than a few months."
It's the economist's version of Supreme Court Justice Potter Stewart's famed "I know it when I see it" test.
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