U.S. economy shrank for the second straight quarter, stoking fears of a recession

New data out Thursday shows the U.S. economy shrank for the second straight quarter, raising concerns that the nation might be nearing, if not already in, a recession. The White House pushed back against that idea, pointing to strong job growth in recent months. Gene Sperling, a senior advisor to President Biden and the American Rescue Plan coordinator, joins Judy Woodruff to discuss.

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  • Judy Woodruff:

    And, as we mentioned, a new report today indicates that the U.S. economy is in a slowdown for certain and possibly a recession.

    This was the second straight quarter where the gross domestic product fell into negative territory, dropping by nearly 1 percent. Economists often mark a recession by two straight quarters of negative growth. But the jobs market has remained strong during the first half of the year, which muddies the picture.

    The president and his team are insisting this is not a recession, at least not yet. But many Americans have told pollsters they believe a recession is already under way.

    I'm joined by — from the White House now by Gene Sperling, senior adviser to President Biden and the American Rescue Plan coordinator.

    Gene Sperling, welcome back to the "NewsHour."

    So, as we're saying, it's not knowable now if the country is technically in a recession. But we know that the — that growth is slowing. And so my question is, does the president think now it's more important to continue this focus on fighting inflation, or is it time to turn and focus more on this coming — this existing slowdown, maybe coming recession?

    Gene Sperling, Senior Adviser to President Biden: Well, this president's entire reason for being here and for — what energizes his economic policy is to have the back of working families.

    And, right now, for working families, the number one issue is higher prices. Now, that's partly because we have had so much job growth and so low unemployment. And so, no, his focus is very much on the things that we can do to lower prices.

    And some of that is about things like the release of the Strategic Petroleum Reserve that's helped us see gas prices go down by 75 cents. And some of the things are in what you were just talking about, the legislation that we can do, which could include a holiday on gas taxes, but, as you saw being discussed with Senator Schumer and Senator Manchin, a provision that could lower the price of prescription drugs, health care premiums for 13 million people, energy costs on a number of different products.

    All of these are part of an agenda to both invest in the country, create more jobs here, but to understand the pinch and squeeze many Americans are feeling from higher prices and to make sure we're addressing that.

  • Judy Woodruff:

    And I do want to ask you about that deal in just a moment.

    But I also heard what you just said about the president wants the focus to remain right now on rising prices. But if you step back a moment, Gene Sperling, with the American people are getting whipsawed, because they are dealing with higher prices, but they're also looking at a situation where purchasing power has been cut into by these rising prices.

    We know wages, the increase in wages, that has slowed down. Unemployment — or rather, employment is starting to slow. So, people are looking at this, and they're feeling the hurt, if you will, in both directions.

    So how do you know when is the right moment to think about focusing on a slowing economy?

  • Gene Sperling:

    Well, Judy, a lot of what you're asking is really probably better suited for the chairman of the Federal Reserve.

    Obviously, it is the Federal Reserve that will independently make assessments on when they feel they have raised interest rates enough to tame inflation. But I think what you have heard from them is consistent with our aspiration, which is that we want to make this transition from this red-hot economy we had in 2021 to a more stable growth with more moderate prices, while still keeping the gains that we have had.

    And, listen, I mean, the reason why you heard Chairman Powell and the reason you hear us saying that we're — that there's no way the last six months were a recession is that that six months created 2.7 million jobs.

    Other than last year, in the history of our country, we have never before created 2.7 million jobs in six months. That type of job growth is certainly not consistent with a recession.

    What we are seeing is a little more resilience than some people have recognized. And we are pointing that out. That's the fact that so many people are working. That's the fact that there's less credit card delinquencies, there's more household savings. The — J.P. Morgan said recently that they're seeing, actually, consumers still spending 10 percent more than next year.

    So I know everybody's talking about the R-word. But one of the R-words we're seeing so far is resilience. And our hope is that and our — is that, because of the steps President Biden has taken, because of the American Rescue Plan, we are better positioned than any country to make that transition to more stable growth with lower prices, while still keeping much of the job gains and employment gains that we have had over the last 18 months.

  • Judy Woodruff:

    It looks like it is a fine line to walk. And I'm assuming you feel the same way.

  • Gene Sperling:

    Well, I think that, again, some of those decisions are for the Federal Reserve.

    I think what we're going to do is do everything we can to have the back of working families. And, look, today was a very good day, the — when you look at policy overall, because we are taking steps to lower prices.

    I mean, Judy, how long have we heard administrations want to have Medicare be able to negotiate the price down of prescription drugs? How long has that been the major price issue for working families? We have a chance to get that done. We have a chance to lower energy prices. We have a chance now to increase the supply of semiconductors, so that we are in — much less vulnerable to foreign countries in the future.

    And I think you're seeing in both of these a strong focus on creating incentives to innovate, locate and create jobs in the United States, whether it's supply of semiconductors or it's the supply of clean energy production.

  • Judy Woodruff:

    And, just quickly, what do you say to Republicans who are already looking at this deal and saying it's going to add to inflation, the Senate deal?

  • Gene Sperling:

    Well, they need to look at the whole deal. I mean, the whole deal is anti-inflationary.

    And, Judy, we have had our disagreements with friends sometimes on inflation, including Senator Manchin and my friend Larry Summers. But you see, from Larry Summers to Elizabeth Warren, everybody is united that this plan pays for itself and actually reduces the deficit by at least $300 billion.

    And so it is anti-inflationary because, on the whole, it is reducing the deficit, but it is also doing things like saving $280 billion to consumers and the Medicare program in prescription drugs. I mean, that is directly lowering prices in one of the key pocketbook issues that's affected families, and particularly seniors, for not only this year, but for decades.

  • Judy Woodruff:

    And, finally, Gene Sperling, speaking of inflation, was the administration, like the Federal Reserve chair, Jay Powell, himself, a number of other economists, are now acknowledging they were late to recognize that inflation was going to be as serious as it was.

    Is the administration acknowledging that as well?

  • Gene Sperling:

    I think what we have acknowledged and is the correct assessment is that we have always been very close to where the private sector top economists and forecasters are.

    In June and July, when we were projecting that inflation was going down, that was just the consensus position of virtually every expert in the country. But one thing with the economy is, like the weather, unexpected things happen. And I don't think that we had a precedent for understanding how Delta and Omicron would bottle up the supply chains involving semiconductors, affecting cars.

    And, as you know, inflation in cars affects our country probably three times more than it does European countries. And, certainly, none of us imagined that, when gas prices had — were going down and at around $3.30 in January 17, we would have an unthinkable war of aggression that would send gas prices up probably over $2 a gallon around the world.

    So I think that we were — I think we had the right private sector consensus, and unexpected things happen, and you have to adjust. And you have to know that can always happen with any economic forecast.

  • Judy Woodruff:

    Senior adviser to the president Gene Sperling, thank you.

  • Gene Sperling:

    Thank you, Judy.

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