President Biden and Treasury Secretary Janet L. Yellen on Thursday dismissed questions about whether the U.S. economy was already in a recession, pointing to the strong labor market and other metrics as signs of its health.
Ms. Yellen, speaking at a news conference at the Treasury Department, said that she did not believe the U.S. was in a recession, arguing that the labor market and household balance sheets remain strong despite slowing growth.
Mr. Biden, speaking at the White House, said that while the economy was slowing, “we see signs of economic progress as well.” The president pointed to comments on Wednesday by Jerome H. Powell, the Federal Reserve chair, who said he did not think the U.S. was currently in a recession.
“And the reason is there are just too many areas of the economy that are performing too well,” Mr. Powell said.
The comments came as disappointing economic data raised fears that the economy could soon enter a downturn, if it is not there already. The Fed made another large interest rate increase on Wednesday as it tries to tame inflation, which is likely to cool the economy further.
Commerce Department data released on Thursday showed that gross domestic product, adjusted for inflation, fell 0.2 percent in the second quarter, the equivalent of a 0.9 percent annual rate of decline.
The 0.2 percent decline followed a contraction of 0.4 percent in the first three months of the year — meaning that by one common but unofficial definition, the U.S. economy has entered a recession a mere two years after it emerged from the last one.
“In the context of today’s report, it’s important to look beyond the headline number to understand what’s happening,” Ms. Yellen said. “Overall, with a slowdown in private demand, this report indicates an economy that is transitioning to more steady, sustainable growth.”
Ms. Yellen said that recessions were usually marked by substantial job losses and family budgets that are under significant strain. She argued that business and consumer spending and industrial output remain strong.
The Treasury secretary added that the global economy was facing numerous risks that could affect the United States’ economic outlook, pointing to Russia’s war in Ukraine, lockdowns in China and supply chain disruptions.
Ms. Yellen acknowledged that inflation remains too high and that taming it was the Biden administration’s top priority.
“We simply haven’t seen anything like this since the 1970s, and seeing what’s happening to food prices and energy prices and rent and other prices in the economy is making families very concerned about their household budgets,” Ms. Yellen said.
She also expressed support for the proposed climate and tax legislation that Senate Democrats unveiled on Wednesday evening, suggesting that it would help ease inflation. The bill aims to reduce prescription drug costs and provide expanded tax credits for electric vehicles while raising taxes on large companies and ramping up enforcement of the tax code.
“These efforts are long overdue, and Congress should pass it immediately,” Ms. Yellen said.