President Joe Biden insisted the country is “on the right path” on Thursday even after the economy shrank for the second straight quarter and inflation rages at a nearly 40-year high.
Taking credit for record job growth, Biden said the slowing economy was actually a sign of a healthy cooling down after the postpandemic boom that helped trigger global price increases.
“It’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” Biden said in a statement. “But even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure.”
The president spoke after federal officials said the gross domestic product shrank by 0.9% in the second quarter. It earlier went down by 1.6% in the first quarter.
Those reductions fit the layman’s definition of a recession although government economists dispute that label.
Biden countered by touting record job creation that has brought the labor force back to where it was before the pandemic and rock bottom unemployment rates.
“That doesn’t sound like a recession to me,” Biden said.
“It’s not what we are seeing right now,” Treasury Secretary Janet Yellen added at a separate event.
The dip comes after the economy roared back to life following the COVID-sparked decline. Juiced by pandemic relief, the U.S. economy grew by an impressive 10.1% in 2021, leaving it vulnerable to an adjustment.
The boom has sent inflation soaring to an annual 9.1% rate, a level not seen in four decades.
The Federal Reserve is more worried about soaring prices than a looming downturn. It hiked interest rates by 0.75% for the second straight month on Wednesday.
Tighter monetary policy tends to slow down the economy and lower consumer demand, moves that should lower inflation.
But if the Fed keeps raising rates fast and GDP keeps shrinking, the economy could go from too hot to ice cold in a hurry.