Real GDP declined at a 1.5% annual rate in the first quarter and, as of Friday, the Atlanta Fed's "GDP Now" model projects zero growth in Q2.
We still think real GDP will turn out to be positive in the second quarter, but if you take the Atlanta GDP Now model at face value, it superficially appears that the odds of having two consecutive quarters of negative growth are close to 50%. That's important, because two consecutive quarters of negative growth is a rule of thumb that many people use for a recession.
We believe a recession is coming but the US is clearly not in one yet. In the first five months of the year, manufacturing production is up at a 6.6% annual rate, nonfarm payrolls are up at an average monthly pace of 488,000, and the unemployment rate has dropped to 3.6% from 3.9%. Meanwhile, in April, both "real" (inflation-adjusted) consumer spending and real personal income (excluding transfers) were at record highs. If this is a recession, we could use more recessions.
We're Not Already in a Recession
June 27, 2022