The White House rejected a prediction on Thursday from Federal Reserve staff that the economy will land in a mild recession later this year.
White House press secretary Karine Jean-Pierre, speaking at a press briefing while President Joe Biden traveled through Ireland, told reporters that there aren’t indications that the country is heading toward a recession, which many economists expect sometime in the next 12 months. She also touted the administration’s economic agenda.
“We’re seeing the success of that — of his plans. And recent economic indicators are not consistent with a recession or even a pre-recession,” Jean-Pierre said.
Jean-Pierre rattled off a list of positive spots in the economy, noting that 12.5 million jobs have been added since Biden entered office, many of which were previously existing jobs that were recovered as the pandemic shutdowns reversed. She also mentioned wage growth and the country’s ultralow unemployment rate, although it is worth noting that wage growth has fallen well behind inflation.
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“Those are the indicators that show us that we are not headed to a recession or a pre-recession. That is because of the work that this president has done over the last two years,” she said.
The remarks come a day after it was revealed that Fed staff expect a recession this year.
Staff predicted a mild recession in a presentation to central bank officials at the Federal Open Market Committee’s March meeting, minutes from the meeting released Wednesday reveal. The meeting came just after the banking system was thrown into chaos with the collapse of Silicon Valley Bank, and staff noted that the fallout from the crisis raises the likelihood of an economic downturn.
“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff's projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” the Fed said in a readout of the meeting.
The meeting minutes were the first time central bank staff acknowledged that a recession is likely and that the Fed will likely be unable to pull off a “soft landing,” which is when inflation is driven down while the economy and labor market remain above water.
After its March meeting, the Fed raised rates by a mild quarter of a percentage point, although some economists expect the Fed to pause its rate revisions at its May meeting.
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Some recent positive news with inflation bolsters that argument. Inflation tumbled nearly a percentage point to 5% in the year ending in March, according to the consumer price index, the lowest such rate since May 2021. In even better news, inflation plunged to a 2.7% annual rate in March, as measured by the producer price index — the lowest level in more than two years.
As of Thursday morning, investors now assign a 66% chance that the Fed will raise rates one more time, according to CME Group’s FedWatch tool, which calculates the probability using futures contract prices for rates in the short-term market targeted by the Fed.