New data points to downturn in U.S. economy
The U.S. economy has shrunk for a second straight quarter, at an annual rate of 0.9%, raising concerns that the country may be heading into a recession and compounding the Biden administration’s political challenges as it grapples with decades-high inflation.
The new figures, released Thursday by the Bureau of Economic Analysis, come at a tumultuous time for the economy, though economists disagree on the likelihood of a full-fledged slump. In the past, six months of contraction have usually indicated a recession. The official determination is made by a panel of experts, though recessions aren’t typical when unemployment is near record lows.
The second-quarter slowdown reflected shifting consumer and business behaviors. Retailers bought fewer items, including cars, as consumers shifted their spending away from goods to services such as restaurants and hotels. Declines in home construction and government spending also contributed to the negative reading.
The sour report on the gross domestic product reflects ongoing problems with inflation, which has been at 40-year highs for several months, as well as weakening home sales and challenges for some corporate sectors, including tech and finance.
Even the red-hot labor market is beginning to show cracks. “Broadly, this shows an economy that is really slowing,” said Jason Furman, an economics professor at Harvard University who was an adviser to President Barack Obama. “This data is much more worrisome than it was in the first quarter. I don’t think you can easily dismiss these numbers.”