Center for American Progress

The Strong US Labor Market Suggests the Economy Is Not in Recession

The Strong US Labor Market Suggests the Economy Is Not in Recession

Economists have long considered many indicators—including the state of the labor market, which is still booming—when determining if the United States is in a recession.

In this article
People attend a job fair at FLA Live Arena in Sunrise, Florida, on June 23, 2022. (Getty/Joe Raedle)

This week, the U.S. Bureau of Economic Analysis will release its first estimate of second-quarter real gross domestic product (GDP) for the United States. Some indicators predict the estimates will show that the United States experienced a contraction—or negative growth—for the second consecutive quarter. Although real GDP growth declined in the first quarter of 2022, the United States has not entered a recession. Governments and economists have long understood that real GDP is just one of many economic indicators used to assess the state of the U.S. economy. A comprehensive reading of economic activity—especially with respect to the labor market, which looks nothing like any recent recessions—shows that the U.S. economy remains strong. Two consecutive quarters of negative real GDP figures do not necessarily mean the United States is in a recession.

How NBER defines a recession

In the United States, the National Bureau of Economic Research’s (NBER’s) Business Cycle Dating Committee uses a range of factors to determine when the economy is in a recession. The committee defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” In fact, the committee explicitly rejects the outdated definition of a recession as two consecutive quarters of negative economic growth.

The NBER Business Cycle Dating Committee explicitly rejects the outdated definition of a recession as two consecutive quarters of negative economic growth.

The committee uses real GDP alongside many other indicators to assess economic activity. When using real GDP, it also uses real gross domestic income (GDI), taking the average of the two. NBER explicitly states that “equal weight” is given to the two measures. Historically, these two measures tend to move in similar directions, and their difference is usually quite small. However, in the first quarter of 2022, real GDI increased by 1.8 percent, while real GDP declined by 1.6 percent. The decline in GDP in the first quarter was partly due to arithmetic and idiosyncrasies resulting from the COVID-19 pandemic: Although the change in inventories were at their second-highest levels in decades, they were lower than in the fourth quarter of 2021, and this decline counts negatively in GDP calculations.

What is GDP and GDI?

GDI and GDP measure two different things but theoretically should be equal. GDI measures economic activity based on incomes earned and costs generated in the production of all goods and services, while GDP is a measure of the market value of final domestic production. Simply put, GDI is an income-side estimate, and GDP is a production-side estimate. The U.S. Bureau of Economic Analysis provides estimates of both measures on a quarterly basis, as well as an average of the two indicators. Economists and policymakers tend to regularly look at both to understand economic output.

The labor market remains strong by historic standards

The NBER Business Cycle Dating Committee uses employment, among other measures, to assess the strength of the economy. The U.S. labor market is very strong right now by many measures. In June, the United States had recovered 98 percent of jobs lost during the pandemic, and all private sector jobs lost at the start of the pandemic have been recovered. Unemployment has remained at its historic lows in 2022. The recovery following the COVID-19 recession has been much faster than previous recoveries, and it has been much more equitable for groups that are usually left behind in recoveries. For example, Black and Hispanic workers are now experiencing unemployment rates consistent with each group’s historic lows.

Today’s strong job growth is simply inconsistent with all recent recessions.

Since January 2022, the United States has added 2.2 million jobs—one of the fastest job growths on record through June.* Yet during each of the past seven recessions, mass job losses occurred. (see Figure 1) Today’s strong job growth is simply inconsistent with all recent recessions.

Figure 1

Other indicators also contrast sharply with previous recessions. Initial unemployment insurance claims remain low—much lower than tends to occur before a recession takes place. Layoffs are also near historic lows, and job openings are near record highs. All these signs point to a strong labor market where businesses expect continued economic growth—not a recession. Industrial production and real spending—other factors the committee considers to determine a recession—have also remained strong this year.

Action by the Federal Reserve could put the strong U.S. labor market at risk

The United States’ rapid and historic recovery from the depths of the coronavirus-induced recession was not inevitable. The Biden administration’s American Rescue Plan—which invested foremost in people and communities—helped the United States avoid significantly higher unemployment rates, long-term scarring, and a double-dip recession. However, if the Federal Reserve increases interest rates too rapidly to lower inflation by slowing economic activity, it may cause a recession and put this historic progress at risk.

While the Federal Reserve is rightly responding to high inflation, it does not need to overreact and rapidly increase interest rates. Today, there remains no evidence that a wage-price spiral is taking place, nor that inflationary expectations are becoming unanchored. Furthermore, inflation is largely a supply-side phenomenon, which monetary policy cannot directly affect; if anything, higher interest rates may cause a slowdown in supply in certain sectors—such as housing—that are already suffering shortages. A recession is not inevitable, and it is important that policymakers, including at the Federal Reserve, do all they can to ensure one does not take place to prevent putting millions of people out of work.


There is no doubt that the global economy is undergoing a period of uncertainty with Russia’s war on Ukraine, climate-related disruptions, and an ongoing health pandemic. The biggest risks to the U.S. economy remain global economic headwinds and overaggressive action by the Federal Reserve. Nevertheless, the current state of the U.S. economy—particularly the labor market—is still relatively strong and is inconsistent with all recent recessions.

*Authors’ calculations using the change in nonfarm employment from January to June in every year since data became available in 1939.

The authors would like to thank Seth Hanlon for his input and Anona Neal for her fact-checking.

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.


Rose Khattar

Former Director of Economic Analysis, Inclusive Economy

Jessica Vela

Research Associate, Inclusive Economy


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