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Is The U.S. Economy In Recession?

Otaviano Canuto profile picture
Otaviano Canuto


  • At this moment, the difference between GDP and GDI has no historical precedent, and the GDI, in the first quarter, came with a positive number, while the GDP fell.
  • As suggested by the resilience of private consumption in the second quarter, the labor market remained tight.
  • Markets have come to assign a high probability that the Fed will “pivot”,  given signs of an economic slowdown. However, the refreshment of stock and bonds markets will likely reverse.
  • Two points remain unclear: if the economy does indeed fall into a recession, how shallow or deep will it be? How rigid downward will inflation rates turn out to be?

Stock market report with bull and bear


The preliminary GDP (Gross Domestic Product) results of the U.S. for the second quarter, released by the U.S. Bureau of Economic Analysis (BEA) on Thursday, July 28, came with a drop of 0.9% in annualized terms. In the first quarter, it also showed a decline, in the order of 1.6% in annual

This article was written by

Otaviano Canuto profile picture
Otaviano Canuto, based in Washington, D.C area, is a senior fellow at the Policy Center for the New South, professor at George Washington University, principal of the Center for Macroeconomics and Development and a non-resident senior fellow at Brookings Institution. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil.He has authored and co-edited 8 books and over 160 book chapters and academic articles, and is a frequent contributor to numerous blogs and periodicals.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

I have certainly not expressed myself well when I referred to being paid by the Policy Center for the New South. I have a contract with them as a senior fellow, and senior fellows are expected to write articles.

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Comments (4)

DonPaul Olshove profile picture
In my opinion, based on experience with the last go-round back in the late 70's, early 80's, we do not have a similar Fed. Back then, a "soft" Fed, afraid to hurt the economy delayed the medicine with predictable results. This time we seem to be starting off with a more Volcker personality and the results will be different. One thing everyone should understand: stopping inflation without a recession is a contradiction in terms. Interest rates will increase till we get a recession. A recession is inevitable. Oh, and the idea of a "soft" landing...well, that's also very, very unlikely. Once people start to pull back they go whole hog - makes for a nonlinear response. Hopefully it's not as bad and it's all over quickly, much faster than 40yrs ago. That was the pain that never ended.
you can put lipstick on a pig and then rename it a hog...at the end of the day; what do you have
Boy, every analyst and Democrat politician really wants to redefine a recession.

And we don't have the lowest unemployment in a long time. We had that in Feb 2020 when we had 1.5% more people (3M) in the labor market. Those 3M people that aren't return are continuing to put a squeeze on employers which will keep wages up, and inflation up. The Fed will have to continue increasing in September.
Otaviano Canuto profile picture
@divJohn I agree about the Fed. Odds now point to either 0.75% or 0.5%. But this does not run against the argument about the premature nature of the "recession" call. Particularly because the evidence on 2 consecutive GDP quarterly declines is fragile
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