Dude, Where's My Recession?
Reader Comments
I like the movie analogy
The "T2" economy: it's like the original T1 economy ("I'll be back") because it always comes back, but the T2 is able to absorb the hits better and fix itself quicker than the original.
Silly premise
cooked numbers along with double cooked numbers on unemployment.Been in RE. for 40 years , you ain't seen nothin yet.Takes a long time (you call it lag) for RE to crash, so stop the silly stock market thought patterns and get ready for many .6 quarters of cooked numbers.How can there be an expansion with RE equity declining every year , not gonna happen , it's going to be a bumpy ride...
NBER
Not only has the NBER never declared a recession without the economy shrinking, they have never declared a recession without two quarters of negative GDP. Not necessarily consecutively, as the rule of thumb goes, but there have always been at least two negative quarters connected to an NBER recession.
However, whether the NBER declares a recession or not, it's pretty clear that the economy sucks right now.
Now this is anecdotal, but here's some food for thought. The hottest game for spring, Grand Theft Auto IV, has just been released and analysts are predicting that this game can rake in over $300 million. Now, that is a conservative estimate, as I believe the game can rake in even more. Also, I just came back from Universal Studios Hollywood and in the one day I was able to spend there, I would have to estimate that there were well over 100,000 people there. Now, if we are in a recession the very first thing that should be cut back on is discretionary spending. Yet people are spending money like drunken sailors. Are some areas of the economy hurting? You bet. Is the entire economy in a recession? I don't know, but it seems people aren't acting like it.
Does inflation impact growth numbers?
IIRC, the entire "growth" for March came from inflation increased spending on gasoline, attributable to higher prices, not higher consumption. If people cut back on spending in housing and construction, appliances, cars, food, and clothing (which they did), where is the growth coming from?
And if bumping the inflation rate up (again, going by memory, the real inflation rate was 9.3% last year when food and energy were factored in) is the only way to increase GDP growth, then aren't we in a recession, particularly if wage growth is lagging behind? If the GDP isn't adjusted for inflation, then a hyper-inflationary economy would look like it was experiencing massive growth, no? Yet it would be a terrible economy in reality. And Greenspan and Bernanke both have been trying to counter deflation by promoting inflation.
I could be wrong; maybe the GDP is adjusted for inflation. Does anyone know?
Recession politics
With Iraq trending down as a political issue, left-leaning pundits have seized on recession predictions to bash Bush and promote their presidential candidate (typically Obama).
As a result, business reporting has morphed in the last 6 months from glassy-eyed cheerleading to rabid anti-Republican fearmongering.
Never before have so many pundits scrutinized so many economic data so closely for signs of recession.
GDP is adjusted for inflation
Thats all
We are nowhere near a recession
I drove from Maryland up to Massachusetts a couple of weekends ago. Every rest stop was absolutely packed- people lining up for food, ice cream, coffee- the Starbucks lines were 20-30 people, waiting to pay $5 for a coffee. The gas stations on the NJ Turnpike had 10-20 cars in line at each pump. This is not peak summer driving season, and the people in line at the Starbucks were not hedge fund managers. I would imagine that in a real recession people would stop taking discretionary trips like these and would bring some sandwiches in a brown bag and a Thermos of coffee (which my mother always used to do on family trips when I was a kid).
Decling Real Estate Values
I love this talk about the tragedy of declining RE values and how that has "implications". If you think about it one-dimensionally then the decline is bad news for current homeowners; however, new home buyers benefit by falling real estate prices.
I think its going to be a rough time for people in the real estate market (lower commisions, fewer sellers) but a good time for younger people with less capital to buy into the market at more reasonable prices.
I think Paul Krugmann has been calling for a real estate meltdown for over ten years now, and as one person already noted; these things take time.
The crises of today ain't what they used to be.... I even heard a talking-head use the term "growth recession."
Ridiculous.
