WASHINGTON — The Biden administration insisted Thursday that the US will not face a recession — despite economists and even President Biden warning that a downturn could begin in a matter of months.
Businesses are bracing for the worst as the Federal Reserve hikes interest rates to tame the worst sustained inflation since 1981.
But when MSNBC host Jonathan Lemire told White House press secretary Karine Jean-Pierre that there are “real fears that the nation could be teetering on the edge of a recession” and asked “How will the White House prepare for that?” the administration’s chief spokesperson struck an optimistic tone.
“There are no meetings or anything happening like that in preparing for a recession because … look, what we’re seeing right now is a strong labor market.” Jean-Pierre answered.
On the same network later Thursday, White House chief of staff Ron Klain insisted: “We are not in a recession … The economy is growing. It is strong. It is creating jobs.”
A reporter aboard Air Force Once asked Jean-Pierre hours later about her TV remarks, noting “the bond market is forecasting a 48% chance of a recession within the next year” — as the Fed raised interest rates to the highest level since 2008.
The surging interest rates are design to slow rising consumer costs by making borrowing more expensive. Annual inflation peaked at 9.1% in June and remained 8.2% in September — well above the central bank’s 2% target.
“Isn’t it imprudent to not be planning for something that there’s a 48% chance of, you know — especially given how badly the White House misjudged the inflation crisis?” the reporter asked, noting that Biden administration officials inaccurately predicted last year that high inflation would be “transitory” before it worsened significantly.
Jean-Pierre launched into a defense of her economic outlook without directly addressing the apparent lack of planning for a worst-case scenario, saying: “It’s not just us and the administration, but it’s other economists who are saying that the strength of our labor market is just not consistent — it really isn’t — with a recession or with even a pre-recession. We believe our economy is incredibly resilient.”
She added, “We continue to believe that thanks again to the president’s economic policies, we can bring inflation down, which he has been working on almost every day these past several months, without giving up the historic gains that we have made.”
The White House generally takes an active role in shaping policy responses to recessions. The West Wing has in-house economists at the National Economic Council and the large White House budget office headquartered nearby shapes requests to Congress and disbursement of allocated funds.
Quarterly economic data for the first half of 2022 suggested the US economy was already in a recession due to GDP contractions at annualized rates of 1.6% and .6%. Surprisingly strong third-quarter growth at an annual rate of 2.6%, revealed last week, showed the economy isn’t in a recession.
Jean-Pierre’s prediction would defy those of a mid-October survey of economists conducted by the Wall Street Journal. In that poll, the respondents put the probability of a US recession in the next 12 months at 63%, up from 49% in July. The economists surveyed by the Journal also expected GDP to shrink over the first six months of 2023, the accepted definition of a recession.
Biden himself has repeatedly acknowledged that a recession is possible.
Biden told CNN host Jake Tapper in an Oct. 11 interview that there could be a “very slight recession.”
“It is possible. Look, it’s possible. I don’t anticipate it,” the president said.
In April, Biden said, “No one is predicting a recession now. They’re predicting, some are predicting, there may be recession in 2023. I’m concerned about it.”
But in other exchanges, Biden has bristled at the possibility. In June, the president reprimanded a reporter for asking about economic experts “saying a recession is more likely than ever.”
“Not — the majority of them aren’t saying that. Come on, don’t make things up, OK? Now you sound like a Republican politician,” Biden said. “I’m joking. That was a joke. But all kidding aside, no, I don’t think it is [inevitable].”
Jean-Pierre’s optimistic messaging comes just days ahead of the midterm elections. Republicans are favored to retake the House and Senate, according to polls, though many races remain tight.
A CNN poll released Wednesday showed that 51% of likely voters said the economy and inflation were the most important issues in determining their vote. An NPR/PBS/Marist College poll released Wednesday found 36% of those who said they were definitely voting Nov. 8 listed inflation as their top issue.