Despite two consecutive quarters of negative growth, the U.S. economy is in a transition phase, not a recession, U.S. Treasury Secretary Janet Yellen said on Thursday.
Yellen insisted that the recession was "a broad-based weakening of our economy," including mass layoffs, business closures, strained household finances and a slowdown in private business activity.
"That's not what we're seeing right now. Economically, jobs continue to grow, household finances remain strong, consumers are spending, and businesses are growing," she told an afternoon Treasury briefing.
However, on the same day she made the remarks, the U.S. Department of Commerce's Bureau of Economic Analysis (BEA) announced that GDP, the broadest measure of economic activity, fell 0.9% in the second quarter.
The U.S. economy has slumped twice in a row, matching the usual definition of a recession, following a 1.6% contraction in the first quarter. The NBER, the National Bureau of Economic Research, is the official arbiter of recessions, though, and a ruling may be months away.
Yellen first cited the administration's economic achievements, including nonfarm payrolls that rose by more than 9 million.
But inflation has proven to be the bigger hurdle, rising to 9.1% in June while economic growth has failed to keep up. Consumer and business confidence levels have fallen sharply. Recent surveys show that an overwhelming majority of Americans believe the U.S. economy is in recession.
Yellen acknowledged the burden of rising prices and said the government was "focusing on" the problem.
"Our recovery has entered a new phase focused on delivering solid, stable growth without sacrificing what has been achieved over the past 18 months," she said. "We know we face challenges and global growth is growing. Slowing down, inflation remains unacceptably high, and lowering it is the top priority of this administration."
U.S. Presidents Biden and Yellen have both touted the possibility of a new bill that Democratic lawmakers have apparently agreed to pass to fight inflation. The legislation aims to raise tax revenue, reduce drug costs, and invest in renewable energy. Yellen noted that she chaired the Federal Reserve from 2014 to 2018, and while the Fed "plays a major role in reducing inflation, the president and I are committed to taking action to reduce costs and protect Americans from the global pressures we face."
The Fed has already raised rates four times this year for a total of 225 basis points, with further hikes likely later this year.
Yellen attributed the rise in inflation to the war in Ukraine, supply chain issues and the pandemic, and she did not discuss the impact of monetary and fiscal stimulus on price pressures.