U.S. 2Q GDP growth: Are we in a recession? U.S. 2Q GDP growth: Are we in a recession? U.S. 2Q GDP growth: Are we in a recession?

U.S. 2Q GDP growth: Are we in a recession?

Christopher Dembik

Head of Macroeconomic Research

Summary:  What is a recession ? This looks like an easy question. Most investors and analysts would answer that two consecutive quarters of negative GDP growth is the common rule-of-thumb definition of a recession. This is not quite that. That’s why even if today’s U.S. 2Q GDP growth is in contraction territory (after a negative print in 1Q at minus 1.4 %), this does not necessarily mean the United States is in a technical recession.

The U.S. Biden administration has prepared the ground for a negative U.S. 2Q GDP print. On 24 July, U.S. Treasury Janet Yellen confirmed GDP growth could be disappointing in 2Q. She is expected to host an (unusual) press conference later today after the GDP report. In a rather unusual move, the White House published a blog article entitled “How Do Economists Determine Whether the Economy Is in a Recession?",  on 21 July.

Let’s first ask the easy question: What is a recession?

The common rule-of-thumb definition in most countries is two consecutive quarters of negative GDP growth. In 1Q, U.S. GDP growth contracted by minus 1.4 % - see Chart 1. Based on the latest statistics (such as the housing market data with a drop of 30 % of new homes sales since December 2021 and 8.1 % only for the month of June), risks are tilted to the upside that growth will contract in 2Q too. This would mean that the United States is in a technical recession. However, this is not that straightforward. The official definition of a recession in the United States differs from other countries. The National Bureau of Economic Research (NBER), an independent body founded in 1920, is the official recession scorekeeper. It defines a recession as a “significant decline in economic activity that is spread across the economy and that lasts more than a few months”. Several variables are taken into consideration, such as: employment (both establishment and household survey), real consumer spending, real manufacturing and trade sales, industrial production and real personal income (excluding government transfers like unemployment insurance). Surprisingly, the NBER does not base much of its decisions on GDP. It is taken into account. But it plays a little role in assessing the reality of a recession. This is for good reasons. GDP is released only quarterly. It is subject to major revisions years after its first release. It can be skewed by a couple of sectors too. The issue of revisions is actually pertinent now. Many economists believe that U.S. 1Q GDP will be revised in positive territory ultimately (this makes sense based on gross domestic income data – which can be considered as an income-side estimate while GDP is a production-side estimate). Expect that private domestic final demand (which represents consumption + business fixed investment + residential) to be revised upward especially. This is our preferred metric at Saxo Bank since it is more correlated to future GDP growth. If this happens, the “two negative quarters” threshold (which matters so much for market participants) will certainly not be met. 

Now, let’s ask a second question: Are we in a recession?

Short answer: probably not judging by the main indicators the NBER and economists look at.

This does not mean that the United States will exit this cycle without going through a recession or a recessionette (term coined by the U.S. economist Diane Swonk to define a healthy contraction in GDP growth which brings down inflation). This will depend on several factors we cannot fully assess now, such as the speed of monetary policy tightening and its impact on the overall economy or the effect of the ongoing Chinese stimulus on the global economy. There is still a lot of uncertainty and lags which make it difficult to forecast the pace of the economy in the near future.

However, based on the indicators the NBER pays most attention (see the list below), we can all agree the United States is certainly not in a recession now. All of them are either still rising or have flatlined. But there is no significant decline. If we look at more real-time indicators (NBER’s indicators are mostly backward-looking), the economy still looks in a fine shape, though decelerating. The state of the labor market is not consistent with an economy in recession, especially. In June, the United States had recovered 98 % of jobs lost during the pandemic, and all private sector jobs lost at the start of the outbreak have been recovered. Unemployment has remained at its historic lows in 2022. Unemployment claims are up a bit. But this can be partially explained by seasonal noise. Job openings are slightly down. But they are still very high. There are cracks in the foundation of recovery forming, of course. No one can deny it (see our analysis about the U.S. housing market risks, Housing IS the business cycle, 23 June). There is also a lot of data noise due to the pandemic effect, which makes it harder than usual to read the economy too. However, these are not the signs of a recessionary economy, in our view. Therefore, we should certainly avoid over-interpreting today’s figures too much. They are volatile and highly subject to revision.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.