The US is already in a “gentle” recession: economist Stephen Moore

Economist Stephen Moore warned Monday that the United States is already in a “soft recession,” noting that the “real question” now is whether the Federal Reserve can achieve a soft landing.

Moore, a visiting fellow at the Heritage Foundation, provided insight into “Varney & Co.” Monday, in response to former Treasury Secretary Larry Summers, who on Sunday contradicted President Biden by saying that a recession in the next two years is “almost inevitable”.

Summers provided the insight when speaking to Bloomberg’s Wall Street Week, noting that there is a risk a recession could hit earlier.

However, last Monday President Biden said a recession was “nothing inevitable” and that he spoke to Summers this morning.

Moore noted Monday that he disagrees with either Biden or Summers and that he believes the US is already in a mild recession.

A recession refers to a decline in gross domestic product (GDP) activity, the broadest measure of the goods and services produced in the economy, for two consecutive quarters.

In late April, news broke that the US economy had cooled noticeably in the first three months of the year as convoluted supply chains, record-high inflation and labor shortages weighed on growth and slowed the recovery from the pandemic.

The Commerce Department said in its second reading of the data last month that real GDP contracted at an annualized rate of 1.5% in the first quarter of this year, slightly higher than the department’s first reading.

Moore pointed to the GDP data on Monday, noting that “the first six months of the year were negative for growth.”

He also noted that the figure “is not a catastrophic drop in GDP, but we’re probably down 1% from six months ago.”

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“And when you add to that the fact that people’s real incomes are falling really fast, like $2,000 to $3,000 a year, that’s a recession,” he continued. “So yes, we are in a recession.”

Moore then said that he believes “the only real question right now is whether we’re going to have a soft landing or a crash landing.”

Many economists like Moore wonder if the Fed can successfully engineer the elusive soft landing — the sweet spot between moderating demand and cooling inflation without sending the economy into a downturn. Rising interest rates tend to result in higher interest rates on consumer and business loans, which slows the economy by forcing employers to cut spending.

Earlier this month, the Fed raised interest rates by 75 basis points for the first time in almost three decades, as policymakers intensified their fight to cool sweltering inflation.

Stephen Moore, Visiting Fellow at the Heritage Foundation, argues that the economic situation could deteriorate in the second half of the year, depending on fiscal and monetary policy measures.

Moore argued that whether a soft landing can be achieved “depends largely on policy decisions made by the Fed and the Biden administration over the course of the next two to three to six months.”

“Right now I’m not hearing much positive from this White House about how to fight a recession when they are talking about higher taxes, more price controls, more regulations and more spending,” he continued. “That will make the problem worse.”

Federal Reserve Chair Jerome Powell tried earlier this month to reassure Americans that higher interest rates will not trigger a recession and that tighter policies are needed to tame prices.

Fox News’ Hanna Panreck contributed to this report.