No, the White House didn’t change the definition of “recession”

Ahead of a key economic data announcement on July 28, critics of President Joe Biden have taken to social media to lay the groundwork for declaring the economy in recession, and laying the blame on the president.

They have noted that if the federal government announces that gross domestic product shrank in the second quarter, it would represent the second consecutive quarter that GDP decreased. This is commonly cited as a sign of a recession being underway.

One Instagram post from July 25 accused the White House of changing the rules of the game to deny the looming reality of an official recession.

The post’s narrator said, "The White House is now trying to protect Joe Biden by changing the definition of the word recession." The narrator went on to read a portion of a White House webpage (also reproduced in the video’s backdrop) that said, "What is a recession? While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle."

Then, the narrator asks Apple’s Siri to define "recession." Siri responds with a definition, apparently plucked from an online dictionary: "A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters."

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The two-quarter threshold mentioned in the video didn’t come from nowhere; it gained a foothold over many years because of its simplicity for the public, news outlets and politicians. It has a good historical track record of lining up with recessions, and it has the advantage of being calculated in real time, rather than months after the fact. 

Meanwhile, experts agree that the U.S. economy faces some important headwinds, recession or not. Despite low unemployment and healthy consumer spending, Americans feel uneasy about the economy when they see daily their costs rising and their 401(k) valuations sinking. And reasonable people can disagree about whether, or how much, Biden’s policies are to blame.

However, the two-quarter threshold cited in the Instagram post has never been official. It’s more like a rough guide — one piece of a complicated puzzle.

The Instagram post is misleading in several ways, but especially in accusing the White House of "changing the definition of the word recession."

For starters, the definition read by Siri — which holds no official stature other than providing an answer chosen by artificial intelligence — includes an important word that the narrator glosses over, namely "generally." In other words, the one-sentence definition Siri provided is not a closed answer. It’s a general guidance that includes exceptions.

Siri could have easily picked another source of information: the website of the National Bureau of Economic Research’s Business Cycle Dating Committee, which is the official arbiter of when U.S. recessions begin and end. It’s also the entity cited throughout the White House’s blog post.

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On the committee’s website — last updated a year ago, well before the current debate — the committee describes the factors it uses to determine the start of a recession, namely "a significant decline in economic activity that is spread across the economy and that lasts more than a few months." Every recession requires "depth, diffusion, and duration" of economic hurt.

Beyond the change in GDP, the committee says it weighs personal income, payrolls, personal expenditures, manufacturing and trade sales and industrial production.

The committee website also addresses the shortcomings of the two-quarters threshold head-on. 

The committee notes that it has sometimes classified periods as recessions even if they did not involve two consecutive quarters of negative growth, such as the 2001 dot-com bubble recession. Also, the 2020 pandemic recession lasted just two months — not enough to produce a full quarter’s worth of data, much less two.

The White House blog post in question — which said the two-quarter metric is not the "official definition" and that the official ruling is made based on a variety of factors, including but not limited to change in GDP — is in accord with what the NBER has long said. And it’s not a sudden change.

Meanwhile, in interviews with PolitiFact, a dozen economists cautioned against overreliance on the two-quarter rule, particularly in the current moment. 

For instance, all economic data gets revised in subsequent months, as more information is collected. This can turn an initial negative number into a positive one, or a positive number into a negative one. 

GDP fell in the first quarter by 1.6%, but economists say this may have been misleadingly negative, because of how inventories and trade data are factored in. A separate statistic — gross domestic income, or GDI — rose at a 1.8% annual pace over the same quarter. The NBER committee uses both GDP and GDI in its recession-dating debates.

Also, data beyond GDP looks strong, including the unemployment rate and payroll employment. And the pandemic has been such an upheaval that there’s no reason to believe that a rigid standard like the two-quarter rule is still valid, said Rajeev Dhawan, director of the economic forecasting center at Georgia State University.

Instagram posts said, "The White House is now trying to protect Joe Biden by changing the definition of the word recession."

It’s certainly to the White House’s political advantage to get ahead of potentially bad economic news, and there are plenty of indications that the U.S. economy faces significant challenges, including the possibility of an eventual recession.

But the White House blog post cited is not only accurate about the official definition, but evidence shows it’s not a definition the White House suddenly cooked up as cover.

We rate the statement False.