Are We Heading Into a Triple-Dip Recession?

By at 27 October, 2022, 9:05 pm


by Raymond J. Keating –

Real GDP grew at 2.6 percent (annual rate) in the third quarter, according to the first estimate by the U.S. Bureau of Economic Analysis. This, of course, came after two quarters of negative GDP growth, that is, -1.6 percent in the first quarter 2022 and then -0.6 percent in the second quarter.

Moving from declines in real GDP to actual growth is always welcome news. However, the debate over recession promises to continue, especially given the fact that we remain in a period of stagflation, i.e., slow growth or recession combined with high inflation.

Indeed, one has to wonder that given the initial pandemic recession and then the two quarters of negative growth in the first half of this year, are we headed into a triple-dip recession?

Has the U.S. ever had a triple-dip recession?

Looking at quarterly real GDP data going back to 1947, there has been no triple-dip recession – that is, three recessions very close to each other in time – during the post-World War II period. As noted in the following chart, there was a double-dip recession – i.e., two recession close together – in 1980 and 1981-82.

As for our recent and current situation, the pandemic and resulting closures generated a recession in early 2020. And then we have the two quarters of negative growth in the first half of this year. There is a debate as to whether this was a recession (or perhaps an ongoing recession depending on what happens in the fourth quarter of this year). It is worth repeating what we have pointed out before: “It must be noted that the official arbiters of when the U.S. enters into and exits from recession is the National Bureau of Economic Research. However, looking at the post World War II economy since 1948, the NBER has never not called a recession when growth was negative in two consecutive quarters. So, for all intents and purposes, this is a recession.”

And then we must turn to trying to figure out what might lie ahead. There’s a great deal of recession talk looking into 2023, and another recession would not be surprising.

Why? Well, in particular, all of the major policy levers are pointed in an anti-growth direction.

The Federal Reserve seems explicitly intent on engineering a recession in the mistaken hope that crippling economic growth (especially on the labor front) is how inflation must be fought.

And then the Biden administration and Congress keep hammering away on a policy agenda focused on higher taxes, hyper-regulation, protectionism or indifference on trade, and expanding government spending (which means draining resources from the private sector via either taxes or borrowing). If one is looking to make matter worse, or at best undermine economic recovery, then this would be the agenda to put forth.

Indeed, the two key policy items that transformed the U.S. economy from severe stagflation, including two recessions close to each other, in the very early 1980s to a robust period of growth, was substantive tax relief and deregulation. In fact, the time from the very late 1970s through the 1980s was the only period post-WWII when federal regulatory costs in the U.S. actually declined for an extended period. There’s a crucial lesson here to be learned, but few in the policy world seem to be taking notice.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.


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