Is the US already in a recession?

(NewsNation) — The U.S. economy shrank for a second consecutive quarter, contracting at a 0.9% annual rate from April to June, according to new data released Thursday. It’s a signal that the long-feared recession has unofficially begun — or has it?

Defining a recession, and determining whether one has started or is inevitable, has become the subject of significant debate in recent weeks.

As a general rule of thumb, two consecutive quarters of negative GDP growth — which is what the Commerce Department report revealed — usually indicates a recession, but economists also take into account other factors before making an official determination.

“Typically for a recession you’re going to see increased unemployment. We’re not seeing that yet,” said Mickey Ferri, an economist and data scientist at Insight Economics.

The current unemployment rate of 3.6% is near a 50-year low, but it remains to be seen whether that number will rise in light of recent interest rate hikes and surging inflation.

So who decides if we’re in a recession? That pronouncement comes from a little-known group of economists at the National Bureau of Economic Research (NBER) whose declaration could still be months away, said Ferri.

Unlike the informal definition, which primarily considers GDP growth, the NBER looks at a wide range of economic activity, including employment data and retail sales.

The nonprofit group defines a recession as a “significant decline in economic activity that is spread across the economy and lasts more than a few months.”

But determining the moment a recession begins in real time is notoriously difficult. That’s because the NBER’s analysis is backward-looking.

Ferri compared it to getting diagnosed at the doctor’s office: “You kind of knew you had a broken ankle because you couldn’t really walk but maybe it took you a week or two before you actually made the doctor’s appointment.”

In other words, a recession almost always starts before the NBER makes the official declaration.

For now, most economists agree we’re not there yet, but Ferri says an uptick in the unemployment rate and a downturn in the housing market could change things in the coming months.

In the meantime, expect politicians to continue arguing about the terminology. If the NBER determines that the U.S. is in a recession it will have significant repercussions going into the midterm elections this fall.

“It influences sentiment, it influences politics, it influences how people even go about their days or whether businesses will invest more,” Ferri said.

The Biden Administration, as well as Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen, have all pointed to the strong labor market as a sign the U.S. is not in a recession.

On the other side, Republicans have accused their political rivals of redefining the term in an attempt to make the economy seem healthier than it actually is.

Nearly 50% of Americans say they are worse off financially today than they were a year ago, according to a new NewsNation poll released Thursday. Comparatively, only 20% of respondents said they are better off.