Tomorrow, the Bureau of Economic Analysis will release its advance report on the economy in Q2, and the White House has a media strategy in place. It comes right out of Animal House, Politico reports, and it’s likely to be just as effective…
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Remain calm! All is well! All is well!
What’s remarkable is that Biden staffers appear to realize that their allies in the mainstream media might need a lot of arm-twisting to carry this rather large jug of water on their behalf:
The White House is scrambling behind the scenes and in public to get ahead of a potentially brutal economic punch to the face that could give Republicans the chance to declare that the “Biden recession” is under way.
Wall Street analysts, economists and even some in the Biden administration itself expect a report on Thursday to show the economy shrank for a second straight quarter, meeting a classic — though by no means the only — definition of a recession.
Senior administration officials are hitting the airwaves and arm-twisting reporters in private, imploring anyone who will listen that the economy — despised by majorities of both Republicans and Democrats fed up with inflation — is still healthy.
But White House officials admit that changing people’s minds is a daunting task as the highest inflation in four decades severely cuts into wages even as the economy continues to churn out jobs and Americans keep spending.
An economy with 9.1% inflation is by definition not healthy. An economy that has yet to recover all of the jobs it lost in a massive downturn two years ago cannot be described as healthy merely because jobs are still getting added. And anyone trying to sell the idea that 15 months of massive wage erosion has left lower- and middle-income households with a healthy personal economy will be viewed as either a demagogue or an idiot. Most likely, both.
The GDP report isn’t the only economic indicator that the White House will have to spin. The Federal Reserve will announce a rate hike today at 2 ET that will have obvious hints as to how the Fed’s governors see the economy and the risks of inflation. CNBC notes that everyone expects another massive 75-basis-point hike today, but there are hints that the Fed might get even more aggressive in response to the latest CPI numbers:
The Federal Reserve is widely expected to raise interest rates by another three-quarters of a point Wednesday, and it could surprise markets by sounding even more unrelenting about tightening policy.
That means the Fed would sound “hawkish,” or in a mode where it is bent on raising interest rates as much as it needs to in order to curb inflation. The central bank is expected to announce the rate hike Wednesday at 2 p.m. ET. Fed Chairman Jerome Powell then briefs the media at 2:30 p.m. ET.
A 75-basis point, or three-quarter point, hike would put the fed funds rate in a range of 2.25% to 2.5%. The Fed started raising interest rates in March, when the fed funds range was zero to 0.25%. …
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The Fed could provide fresh commentary on the economy, which it may acknowledge is slowing.
“There’s going to be a lot of two-handed economist talk from Jay Powell,” said Vincent Reinhart, chief economist at Dreyfus and Mellon. “He’s going to say we’re definitely going through a soft inventory and trade cycle.”
According to the White House, it will be a happy fun-time supercool soft inventory and trade cycle, though.
The economic indicators of late have definitely trended to a slowing economy, although not necessarily one that’s actively contracting — yet. Today’s report on durable goods orders, for instance, showed a 1.9% jump over May, but … that’s not adjusted for inflation. The CPI month-on-month rate of inflation in June was 1.3%, making this a minimal gain. It looks even worse outside of transportation, where new orders only went up 0.3% in unadjusted-for-inflation figures. Shipments of durable goods only went up 0.3% overall in June too, which suggests some inventory stocking has already taken place.
Also today, amber lights continued to flash in home markets. Contracts to purchase resale homes dropped 20% in June, thanks in part to skyrocketing mortgage rates linked to the Fed’s rate hikes. Pending home sales of all types dropped far more than expected as well:
Signed contracts to purchase existing homes dropped 20% in June compared with the same month a year ago, the National Association of Realtors said Wednesday.
That is the slowest pace since September 2011, with the exception of the first two months of the coronavirus pandemic lockdowns, when sales plunged briefly and then rebounded sharply.
On a monthly basis, pending home sales fell a wider-than-expected 8.6% in June. A Dow Jones survey of economists had predicted a 1% drop.
The steep declines coincided with a sharp jump in mortgage interest rates. The average on the 30-year fixed loan crossed over 6% in the middle of June, according to Mortgage News Daily. It started the year around 3%. Those high rates and inflation in the general economy are hitting buyer sentiment hard.
Weekly mortgage demand has dropped for four straight weeks as well, falling 1.8% in the past week overall. Refinancing applications dropped 4% in the past week and are now 83% lower than a year ago, a drop that has implications for secondary and tertiary industries in home remodeling and repair. As rates climb, refinancing becomes a much worse proposition, and with it opportunities to reinvest back into the property for future sales.
Roll all of that up in a negative GDP report, which the White House now obviously expects to see tomorrow, and let’s see how many media outlets will be willing to carry the White House’s jolly water even for a single news cycle. Oh, there will be some reporters who’ll happily slip into the yoke, surely, but probably not nearly enough for Joe Biden and his team to escape accountability for the way Americans experience his economic policies.
Update: Jeff Dunetz does his patriotic part by offering Biden and the White House some euphemisms for economic failure. I loved the Paul Pelosi suggestion.
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