The US economy shrank from April through June for a second straight quarter, contracting at a 0.9% annual pace and raising fears that the nation may be approaching a recession. The decline that the Commerce Department reported Thursday in the gross domestic product—the broadest gauge of the economy—followed a 1.6% annual drop from January through March. Consecutive quarters of falling GDP constitute one informal, though not definitive, indicator of a recession. But the AP reports that Fed Chair Jerome Powell and many economists have said that while the economy is showing some weakening, they doubt it’s in recession.
Many of them point, in particular, to a still-robust labor market, with 11 million job openings and an uncommonly low 3.6% unemployment rate, to suggest that a recession, if one does occur, is still a ways off. "We’re not in recession, but it's clear the economy’s growth is slowing," Moody's Analytics chief economist Mark Zandi tells CNBC. "The economy is close to stall speed, moving forward but barely." The combination of mounting prices and higher borrowing costs have taken a toll. The Labor Department’s consumer price index skyrocketed 9.1% in June from a year earlier, a pace not matched since 1981.
And despite widespread pay raises, prices are surging faster than wages. In June, average hourly earnings, after adjusting for inflation, slid 3.6% from a year earlier, the 15th straight year-over-year drop. Consumer spending—which the Wall Street Journal reports makes up about two-thirds of total economic output—was up just 1% for the quarter. And Americans are losing confidence: Their assessment of economic conditions six months from now has reached its lowest point since 2013, according to the Conference Board, a research group.
The definition of recession that is most widely accepted is the one determined by the National Bureau of Economic Research, which defines a recession as "a significant decline in economic activity that is spread across the economy and lasts more than a few months." Its Business Cycle Dating Committee assesses a range of factors before publicly declaring the death of an economic expansion and the birth of a recession—and it often does so well after the fact. (Read more US economy stories.)