US is already in a 'soft' recession: Economist Stephen Moore

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

Moore, a visiting fellow at the Heritage Foundation, provided the insight on "Varney & Co." Monday, reacting to former Treasury Secretary Larry Summers contradicting President Biden on Sunday by saying that a recession was "almost inevitable" in the next two years.

Summers provided the insight speaking on Bloomberg's "Wall Street Week," noting that there was a risk a recession could come sooner.

However, last Monday, President Biden said that there was "nothing inevitable about a recession," and that he talked to Summers that morning. 

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Moore noted on Monday that he didn’t agree with Biden nor Summers and that he believed the U.S. was already in a mild recession. 

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

It was revealed in late April that the U.S. economy cooled markedly in the first three months of the year, as snarled supply chains, record-high inflation and labor shortages weighed on growth and slowed the pandemic recovery.

The Commerce Department said last month, in its second reading of the data, that real GDP decreased at an annual rate of 1.5% in the first quarter of this year, which was 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 have been negative for growth." 

He also noted that the figure is "not a catastrophic loss in GDP, but we’re probably down 1% from where we were six months ago." 

"And then when you add to that the fact that people’s incomes in real terms are falling really fast, something like $2,000 to $3,000 a year, that’s a recession," he continued.  "So yeah, we’re 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 we are going to have a crash landing." 

Many economists, like Moore, are wondering whether the Fed can successfully engineer the elusive soft landing — the sweet spot between tamping down demand to cool inflation without sending the economy into a downturn. Hiking interest rates tends to create higher rates on consumer and business loans, which slows the economy by forcing employers to cut back on spending.

Earlier this month, the Fed raised its benchmark interest rate by 75-basis points for the first time in nearly three decades as policymakers intensified their fight to cool red-hot inflation. 

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

"Right now I’m not hearing much positive out of this White House in terms of how to combat a recession when they talk about higher taxes, more price controls, more regulations and more spending," he continued. "That’s going to make the problem worse."

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Federal Reserve Chairman Jay Powell earlier this month sought to assure Americans that higher rates will not trigger a recession and that tightening policy is necessary in order to tame prices.

Fox News’ Hanna Panreck contributed to this report.