US President Joe Biden insists that the US economy is "on the right path" despite the GDP taking a plunge, and pushing the country into a technical recession.
"It's no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation. Even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure," Biden said.
Biden also heaped praise on the job market, arguing that it "remains historically strong, with unemployment at 3.6% and more than 1 million jobs created in the second quarter alone."
US unemployment reached a record high of 14.8% in April 2020, with the loss of some 20 million jobs in the aftermath of the coronavirus breakout. Jobs recovery has been stellar since, with the unemployment rate staying at 3.6% since April this year, below the 4% defined by the Fed as "maximum employment". Wages have also risen month after month since April 2021, expanding by a cumulative 6.4% over the past 15 months, or an average of 0.4% a month.
He added that he was committed to reducing inflation without giving up anymore economic gains and nudged Congress to promptly pass relevant legislation that include the Chips and Science Act and Inflation Reduction Act.
The Chips and Science Act passed the US Senate with bipartisan support on Wednesday, with the aim of helping the United States compete with China by injecting tens of billions of dollars into the domestic production of semiconductor chips. The bill will now head to the US House, where lawmakers hope to pass it and send it to Biden for his signature before he leaves in early August for overseas trips.
The Inflation Reduction Act of 2022, which addresses everything from prescription drug costs to corporate taxes to the climate, had been stalled for months but appeared to make progress this week after the support voiced by Democratic Senator Joe Manchin, who initially put up a fight with Biden over the bill.
The Inflation Reduction Act of 2022, which addresses everything from prescription drug costs to corporate taxes to the climate, had been stalled for months but appeared to make progress this week after the support voiced by Democratic Senator Joe Manchin, who initially put up a fight with Biden over the bill.
The US economy shrank grom April through June for a second straight quarter, contracting at a 0.9 percent.
"Real gross domestic product (GDP) decreased at an annual rate of 0.9 percent in the second quarter of 2022," the Bureau of Economic Analysis, a unit within the Commerce Department, said in a news release, announcing the so-called "advance estimate" on GDP.
The department issues three estimates altogether on GDP for each quarter. The advance estimate is the first and will be followed by two other estimates before the third quarter.
This comes after Federal Reserve Chair Jerome Powell insisted on Wednesday that he did not believe the US economy was in recession, and stressed he believed the country could avoid one.
"We're trying to do just the right amount. We're not trying to have a recession and we don't think we have to. I do not think the US is currently in a recession," he said after announcing the country’s fourth rate hike for this year that brought key lending rates to a range of between 2.25% and 2.5% from the February level of zero to 0.25%.
At the same time, Powell said that the US could see another exceptionally high interest rate hike as inflation remains extremely challenging.