A new report on the economy is fueling recession fears
MARY LOUISE KELLY, HOST:
A new report card on the economy is fueling fears that the United States is in a recession. The U.S. economy contracted for the second quarter in a row. Economists and politicians are debating whether that means a recession is, in fact, underway. There's little question Americans are feeling pressure from slowing growth, rising prices and high interest rates. NPR's David Gura reports.
DAVID GURA, BYLINE: Lindsey Krenz owns a hair salon in Jamestown, N.D. That's about 90 miles west of Fargo. And while she's aware of how the broader economy is doing, her sense of it is shaped by what's in her appointments book.
LINDSEY KRENZ: People are maybe spacing their appointments out, not coming in as frequently as they used to, but they are still coming in.
GURA: So business is slower, and it's been hard to get supplies. Krenz says they've gotten more expensive. The price of a tube of hair color is up a dollar, maybe $1.25. And when something she needs at the salon goes on sale, Krenz does not wait. She stocks up. And at home, she's changed her spending habits.
KRENZ: Yeah, I guess we're just being a little extra cautious right now, my husband and I, and not doing a lot of extra spending on things that aren't necessities right now because we are uncertain about where things are going.
GURA: Utility bills have gone up. They're cutting back on some subscription services. Krenz lives close enough to work to walk there, but some of her clients live 100 miles away, and they complain about gas prices. Right now, Krenz says, there's a lot of economic uncertainty.
KRENZ: To me, it doesn't feel like we're in a full recession yet, but it does seem like it is definitely a possibility around the bend.
GURA: Many economists share that outlook. Inflation is at a 40-year high, and the Federal Reserve is trying to get it under control by hiking interest rates aggressively to slow down the economy. Like Krenz, Fed Chair Jerome Powell does not think the U.S. economy is in a recession, and he continues to argue he and his colleagues will be able to bring inflation under control without triggering a recession.
JEROME POWELL: We continue to think that there's a path to that. We know that the path has clearly narrowed, really based on events that are outside of our control. And it may narrow further.
GURA: New data are fueling fears we're already there, in a recession. Today we learned that in April, May and June, the U.S. economy shrank again. That's two quarters in a row. And for many economists, that means a recession. But President Biden and his advisers say, no, it's not a recession because of how strong the labor market is. It added 372,000 new jobs in June. Jeremy Schwartz is a senior U.S. economist at Credit Suisse.
JEREMY SCHWARTZ: So two consecutive quarters of negative GDP looks pretty bad. But when you dig into the details, it's actually some unusual features driving it.
GURA: Consumer spending slowed, but it was still positive. Wages have gone up but have not kept pace with inflation, so people are spending less. Stores are dealing with a glut of inventory, according to today's report. And that echoes what retailers are saying. Walmart says that because food and other essentials have gotten more expensive, store shelves are packed with stuff that's not selling. And in many places, there aren't enough workers to sell that stuff. Krenz sees that in her hometown, especially in the restaurants.
KRENZ: The prices are getting higher and higher. So then it does make you wonder if they are going to be able to stay open or if the public is going to support those businesses.
GURA: So far, they have nationwide. Even though the economic outlook is uncertain, according to that GDP report, people did not stop treating themselves to dinners out. David Gura, NPR News, New York. Transcript provided by NPR, Copyright NPR.