Is US economy heading to imminent recession?

The GDPNow tracker shows that economic growth in the spring was flat at 0%, a steep decline from its previous estimate of 1.3% on June 1 and 0.9% on June 8.

President Joe Biden said a recession is “not inevitable” and he is confident the United States can overcome inflation. Biden gave two main statements during the AP interview while saying, “First of all, it’s not inevitable,” Biden adds, “Secondly, we’re in a stronger position than any nation in the world to overcome this inflation.”

Recessions are technically defined by two consecutive quarters of negative economic growth and are characterized by high unemployment, low or negative GDP growth, falling income and slowing retail sales, according to the National Bureau of Economic Research (NBER), which tracks downturns.

Wall Street is on the alert for signs of a looming economic recession as the Fed attempts to tame the hottest inflation in nearly four decades, and one gauge indicated this week that a downturn could be looming. A closely followed measurement from the Atlanta Fed Bank suggests the US economy could be heading to a second-quarter decline in gross domestic product, the broadest measure of goods and services produced in a country.


Fed Chair Jerome Powell arrives to speak at a news conference March 3, 2020, to discuss an announcement from the Federal Open Market Committee in Washington.

Economic growth in the US is already slowing. The Bureau of Labor Statistics reported last month that gross domestic product unexpectedly shrank in the first quarter of the year by 1.5%, marking the worst performance since the spring of 2020, when the economy was still deep in the throes of the COVID-induced recession.

If the economy decline in the second quarter, it could meet the technical criteria for a recession, though the NBER, the official arbiter, may not confirm it immediately.

A growing number of economists and Wall Street firms, including Bank of America, Deutsche Bank and Wells Fargo, are forecasting the possibility of a recession within the next two years, as the Fed moves to aggressively tighten monetary policy in order to cool consumer demand and bring inflation back down to its 2% target.

The US central bank is hoping to achieve the rarest of economic feats as it moves into full inflation-fighting mode, cooling consumer demand enough so that prices stop rising, without crushing it so much that it throws the country into a recession.

Although Fed policymakers are counting on finding that elusive sweet spot, known as a soft landing, history shows that the US central bank often struggles to successfully thread the needle between tightening policy and preserving economic growth.

The Fed already voted Wednesday to lift its benchmark interest rate by 75-basis points for the first time since 1994 as it ramps up its war on inflation. Another interest rate increase of that magnitude is expected in July, which would put the federal funds target range at 2.25% to 2.50%, the steepest since the COVID-19 pandemic began two years ago.

Hiking interest rates tends to create higher rates on consumer and business loans, which slows the economy by forcing employers to cut back on spending.

Although Fed Chairman Jerome Powell has said the central bank is not trying to induce a recession, he has not ruled out the possibility of a downturn and has admitted the odds of a successful “soft landing” are getting narrower.

“There is a path for us to get there,” Powell said Wednesday, referring to a soft landing. It is not getting easier. It is getting more challenging.