Not-So-Bad News is Good News

White House Steals Some Limelight

Earlier this week, the White House found itself at the center of drama (yet again) when people noticed a surprising update to the www.whitehouse.gov website. The screenshot below quickly made its rounds as it became clear the White House was trying to give the market an early warning of today’s GDP data, which confirmed a second consecutive quarter of negative growth (the actual print was even worse than expected despite the WH hint).

Traditionally speaking, many have used these GDP contractions to signal the onset of an economic recession. The White House downplayed these signals, stating that this is “neither the official definition nor the way economists evaluate the state of the business cycle”. And that’s fair.

The definition used by US government agencies when determining economic conditions comes from the National Bureau of Economic Research (NBER). NBER defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

The White House provided additional clarity on some of the economic activity that proves the US is not actually in a recession, including the labor market, consumer & business spending, industrial production, and incomes. This clarification more accurately represents a “holistic view” of the economy.

Regardless of the intent, downplaying GDP contractions and their implications for the economy and markets can be problematic. So let’s unpack this a bit.

Where We’re Going > Where We’ve Been

The Fed is considered an independent body that sits outside the direct purview of government, but their recent commentary on the state of the economy has quite a few similarities to those implied by the White House release. The Fed continues to hammer home that the labor market is strong, so much so that Powell even sug