The Recession That Wasn't

The "trick" of economic management is supposed to be that of avoiding recessions while also fighting inflation, preserving the value of the dollar, maintaining full employment and NOT running up the national debt and the trade deficit with other nations.

No one wants a recession, but those cheering how this one has "disappeared" might want to consider that your Uncle Sam and his private Federal Reserve is printing money at unprecedented speed in several different ways (diluting the value of your dollars) and seeing to it that if you loan money to a bank (checking, savings or CD accounts) you will incur a guaranteed loss against real inflation for doing so. Magic? Uh, no. More like systemic slight-of-hand.

If we're now out of the recession we were never in (or whatever this author is saying), I'd like to see the artificially low bank interest rates for savers restored to where they were before the last seven or eight "emergency" cuts at the Fed.

Fat chance, right?

It's ironic that "conservatives" in government have seen fit to literally slap the most financially conservative people in our society----the FDIC-insured bank savers, and for all the years since Bush was elected--- while they presided over outlandish usery by the credit card issuers and the greatest runup of national debt in the history of the world. "Conservatives" now need a new word to describe themselves, because their minions have turned this one upside down and made a lie out of what it is supposed to mean.

long term umemployment and jpt

Ironically, when we discuss unemployment, it often misses the most crucial numbers the Long Term Unemployed, and of course Jobs Per thousand.

You say that we are not at recessionary numbers.. then I susggest please go back and recheck your numbers and information, and make sure you don't forget the 1.4 million (weekly) who are long term unemployed and are NOT counted as the Unemployed because they are not collecting their checks. Make sure you dont forget the 4 million who are working part time, because employers keep cutting hours and wages. - Not since World WAR 2 has long term unemployment been as bad as it is today!

Oh, and let's not forget that wages are at the lowest ever adjusting for inflation. In fact our generation is the First Generation which is not making more money than the previous one.

Wages, have been in a decline at least 4 times in the past 5 years.

There are many other issues here to look at.. but, I suggest you consider reading the experts at EPI.org - they have rarely been wrong, if ever.. must be the Education that they have behind them, and that they really are no partisan, and don't have ulterior motives..

I suggest getting some facts straight.. and more than anything look at Payroll Per thousand.. that is the population growth compared to Jobs for the population! Those are the Accurate numbers you REALLY want to look at..

Patsy

Unemployed and Evicted = No Recession

I guess the fact that I, an educated and degreed woman, have been without full time , permanent work since January 2007 ( I managed to snag a series of temp jobs for under $10 an hour, until just the past March, when all the agencies I've been calling suddenly 'had nothing' for me) and the fact that now I must vacate my apartment due to inability to pay rent, and that for some odd reason I am NOT eligible for unemployment (seems I was unemployed too much of the time to qualify for benefits) means there's something wrong with me, or I just have bad luck, but has nothing to do with the true fact that we are in a recession? Hmm.. I think I understand economics now..thank you.

Unemployed and Evicted = No Recession

I guess the fact that I, an educated and degreed woman, have been without full time , permanent work since January 2007 ( I managed to snag a series of temp jobs for under $10 an hour, until just the past March, when all the agencies I've been calling suddenly 'had nothing' for me) and the fact that now I must vacate my apartment due to inability to pay rent, and that for some odd reason I am NOT eligible for unemployment (seems I was unemployed too much of the time to qualify for benefits) means there's something wrong with me, or I just have bad luck, but has nothing to do with the true fact that we are in a recession? Hmm.. I think I understand economics now..thank you.

Unemployed?

if you don't have a job, spend more time looking for one, and less time posting on blogs on the internet and maybe you'll find one.

The Last Recession Ended ? When ?

By reading stories from the AP, it would be impossible to determine when the Recession of 2001 ended, so how exactly can there be a new recession ?

Re: Unemployed and Evicted = No Recession

Yes, that is how economics work. There is probably something wrong with you or maybe its just bad luck. Or you could be in an overheated job-market and unwilling to move (most likely). I heard that the South and Southwest are booming. You should take a look.

I don't think people's personal job issues should be held up as economic indicators. I have always thought economists would have just as much success with a magic eight ball to predict what will happen. I hope that he is right but really only time will tell.

The plural of anecdote is not data

To "Unemployed and Evicted":

I am sorry about your personal circumstances, but even in times of high growth there are educated and degreed people who have trouble finding jobs for any number of reasons. I have been continuously employed for 18 years. Does this prove there has NOT been a recession during that time?

Personal anecdotes of this sort prove nothing about whether we are in a recession or not.

The question with me isn't whether we've crashed - we haven't - but whether we're going to crash in the next couple of quarters from the accumulation of bad news/expectations.

If the Democrats win the Trifecta in November - House, Senate, and White House I don't think there's any doubt that the economy will slide into recession as (a) fiscal policy changes to accomodate their loony-tune ideas and (b) their ideas are loony-tunes to begin with. "Tax and Spend" only works if capital can't fly away across the border and there will be much more profitable places to invest overseas if Pelosi gets her way here.

If the economy staggers along long enough the credit crunch will ease and oil speculation will burn itself out. Then the economy will come roaring back. I don't think the turnaround will come this year, unfortunately. it's to the media and the pundits' advantage to keep talking down the economy, at least through Election Day.

Savings

Daniel,

Savings accounts have been a terrible "investment" for generations.

Long-term "savings" should be in stocks, bonds, or the like.

Only a small amount cash should be in a savings/checking accounts. If someone has only a small amount of cash with no extra for long-term "savings", then interest on their savings is the least of their problems.

Deal With Reality

Ma'am, if you have been unemployed from January 2007, when the recession didn't start at the earliest until the 4th quarter of that year, then it is absolutely certain that your unemployment wasn't caused by a recession. Especially since jobs are a lagging indicator, not a leading one.

I know it's comforting to blame the economy, but it's also comforting to blame the alignment of the planets.

The experts at EPI.org

To "long term umemployment and jpt"

"the experts at EPI.org - they have rarely been wrong, if ever.. must be the Education that they have behind them, and that they really are no partisan, and don't have ulterior motives.. "

Just a thought on the non-partisanship and lack of ulterior motives at EPI, but I find it interesting that almost a third of their board of directors are employed as Union Presidents or AFL-CIO officers.

You being out of work ...

DOES NOT MAKE A RECESSION ...

The liberal grasp of simple economics is truely startling ...

out of work, out of a home but apparently still has internet accesss ... I think somebody is making something up ...

Recession or not

Assuming the NBER definition, wouldn't we be in expansion if the 4th quarter was the lowest GDP growth and per your data 1st quarter was 2x 4th quarter and 2nd quarter would be 2x 1st quarter.

It would seem that the lowest GDP quarter followed by a 2x growth followed by a 2x growth would match the trough to peak, not peak to trough of the NBER definition.

So whatever definition you use (2 back to back quarters of decline or peak and trough), we aren't in a recession.

Recession or expansion

Assuming the NBER definition, wouldn't we be in expansion if the 4th quarter was the lowest GDP growth and per your data 1st quarter was 2x 4th quarter and 2nd quarter would be 2x 1st quarter.

It would seem that the lowest GDP quarter followed by a 2x growth followed by a 2x growth would match the trough to peak, not peak to trough of the NBER definition.

So whatever definition you use (2 back to back quarters of decline or peak and trough), we aren't in a recession.

Reminds me ..

If the definition of recession/depression:

A recession is when your neighbor loses his job.

A depression is when you lose your job.

Recession

Of course, we can't be in a recession since you can eliminate everything inflationary from the calculation, see: http://www.financialsense.com/stormwatch/2005/0624.html. Unfortuationaly, real people, in the real world, have to pay real prices. We can't pay the fictional ones in the "Consumer Price Index", that the gov't provides (try saying, I'll only pay the price in the Consumer Price Index) see how far it gets you.

Dear Patsy

Please Google the words "liberal Economic Policy Institute" and then try telling us again how the EPI is nonpartisan. This outfit's been peddling economic chicken-littlism since its founding in 1986 by the likes of Robert Kuttner -- you know, the guy who co-founded that other font of objective commentary, The American Prospect.

Dear Patsy

Please Google the words "liberal Economic Policy Institute" and then try telling us again how the EPI is nonpartisan. This outfit's been peddling economic chicken-littlism since its founding in 1986 by the likes of Robert Kuttner -- you know, the guy who co-founded that other font of objective commentary, The American Prospect.

CPI

(try saying, I'll only pay the price in the Consumer Price Index) see how far it gets you.

Well, it gets me a lot farther for technology and somewhat farther for medical care. Not as far for food or fuel. Yes, they exclude some signifcant inflationary items from the calculation, but they also badly underestimate the increased value for you money from technological advances.

...an educated and degreed woman...

Maybe if, instead of getting educated and degreed, you had learned the sorts of skills that would make you an asset to an employer, they would find it in their best interest to hire you.

Just a thought.

Meaningless statistics

The problem is that the way we now measure CPI has been changed by the Clinton then the Bush administration. If we were to calculate CPI the way they did before, the number would be about 3 to 4% higher. Now you take this and use it to calculate the real Q1 GDP... surpirse surprise it is now negative by around 1%.

(See http://www.shadowstats.com/) Try to use M3 money supply to get another reading of the inflation? the Fed has stop calculating M3 around the time they last modified the CPI... The Fed said it was expensive and didn't really need it anymore...ummmm. This sort of behavior is typical of this administration, when you don't like 'em numbers, just change how they are calculated. Seriously it doesn't take a wisard to know prices are skyrockeing and eventually it'll feed into the CPI. How ironius the CPI is now a lagging indicator!!! What is really sad now is that when it does feed in, it'll be to late, the inflation genius will already be out of the bottle.

And btw, the same scam is applied to the unemployment figures. "Same same but different" as they say in Thailand.

So no we are not in a recession, in fact the economy looks really good based on the "numbers"

have we ever had a recession when unemployment was below 5.5%?

I saw the old neighbor-job quote earlier...

Seriously, what is the lowest unemployent rate in which a recession occurred? That neighbor losing his job...any different from the neighbors who lost their jobs in the 90's? I guess neighbors never lost their jobs before Bush...that bastard. No one ever defaulted on their mortagage before...do we bail out everyone who is defaulting or half of them?

Saw someone else bitching about not being able to get a job...

try this: 'change' or 'move'. If you can't find employment in 5% unemployment scenarios, you never will. We all want to be Robert DeNiro's PA, but if he isn't hiring, you have to try someone else.

My favorite lines of bitching...

"people are working, but they are not good jobs"

if we elect a democrat, they suddenly will turn into wonderful jobs? We are a service economy, and dealing with a the public at large is going to have its disappointments-suck it up.

"yea, the unemeployment rate is low, but that doesn't include the people who dropped off the roles"

How do you go from needing a job, to not getting a job? did a windfall of cash fall on these people? Maybe the unemployment check was KEEPING them from getting work? Say it ain't so.

Stocks are not everybody's answer

Thanks, mockmook, for pointing out we should all be in stocks----together with their risks THAT ARE NOT AS APPROPRIATE FOR OLD FOLKS AS ADVERTISED. That's also the line your government is giving you while placing the Fed Funds rate at 2% while inflation is at 5% or more and your national debt has nearly doubled under a single president.

Bank borrowing rates (from you) are artificially low while bank lending rates on credit cards are artificially high with corporations pocketing an outlandish spread.

The answer to this is not "stocks"---it is honest reporting of inflation and honest monetary and fiscal policy, something you won't see until Republicans are out of power. As it is, your government has been managing for the stock market, not for the stability of the dollar. Don't believe me? Look at oil, gold and foreign currencies.

Recession By Anecdotal Evidence

So, if a person experiences difficulty finding a job (who knows if it's due to declining job market, unrealistic expectations, or plain laziness), ALL people are having difficulty finding a job?

That's hardly proof we are in a recession. People see what they want to see. And, what I see are some people who want to see recession...

re: stocks are not everybody's answer

Yes, stocks are not good for money that must be spent within 3 to 5 years. Annuities are a reasonable alternative for older people: you can usually get a rate higher than anyone ever has gotten on a savings account, and the rate is locked in.

You are clueless about the "usurious rates of credit cards". If you had a decent credit record during the last 5 years, you've been deluged with 0% credit card offers. The correct strategy for those years has been to have a HELOC for backup, and use 0% credit cards for any financing of medium term debt (3 year time frame). If you ever have a 0% offer ending without a new offer to roll it into, you pay it off with the HELOC until the next 0% offer comes along.

There are always suppliers who would like to overcharge ignorant or desperate customers. It is up to the individual to show some due diligence and discipline to keep themselves in advantageous circumstances. Such is the case in credit cards. You can be a dummy and bury yourself in 20+% debt, but if you have been careful in your use of debt, maintained a good credit history, and kept informed of "what's out there", this has been a time of unusually high availability of low priced money.

Make Sure You are all Arguing About the Same Thing

The NBER can define "recession" any way it wishes, but in popular usage, what we are trying to get at is whether the output of the economy is expanding or contracting in *real* terms. This requires an adjustment for inflation. Nobody would argue, for instance, that Zimbabwe has grown 1000% just because the prices of everything made there have climbed by 1000%, right?

Now, if you deflate GDP with an artificially low measure of inflation like the current figures do, then you end up with an artificially high measure of output. Add that to the inventory buildup, and the conclusion that can be fairly drawn from the most recent figures is not that great. Negative, actually.

End of the financial world? No. But closer to the real world experience of many (but not all) Americans? You bet.

So far, so good?

Inflation is understated by 3-4% (via ignoring energy and food costs), GDP is overstated by 2-3% (via understating inflation), unemployment is understated by 3-4% (via fictional "birth-death" calculations). Most importantly, the stock market is overstated by 40-50% due to the devaluation of the US dollar over the past ten years. And most of the profits of this bull(bull****?) market turn out to have been financial 'services' that we now understand to have been a derivatives-based house of cards that isn't even in the first inning of unwinding.

So, what do you call it when the US economy is relentlessly losing ground against its competitors? What do you call it when our standard of living has peaked and is sliding precisely at a time when the demographic wave is peaking into its retirement years?

Wait until you see how this reflects in the markets once they realize that there is no other bubble to reflate the economy like the housing bubble did after the dot.com bubble burst. The markets are already in a profit recession, Mr. Pethokoukis, and the second half will have to be KILLER to justify the current S&P PE, let alone growth from here.

I'm a rock climber and your comment ("But so far the data say 'no.'") reminds me of the joke about the climber in mid-fall who says, "so far, no problem."

Thanks, too, Ken (above) for pointing out that "deals" are out there on credit card interest rates for those of good credit willing to shop around and move, as needed, to the next "introductory" offer from some other lender.

My point about credit card rates being "usery" by banks is that the AVERAGE rate on cards is ridiculously high compared to the AVERAGE rate paid to depositors for use of the money. There is no precedent, really, for the size of these spreads and the fantastic amount of money being extracted from individuals and poured into corporations by these methods. And your Federal Reserve is what makes it happen that way.

Credit Cards Again

Daniel,

Actually, the nominal rates on credit cards today are about 18% unless you go into penalty rates for being late (but you can get 9.9% long term). This is almost exactly what the rates were decades ago (though I don't remember if they had penalty rates back then.) The savings rates were 3 or 4%, which you have to shop for to get today. Some online banks such as Ing.com and Emigrant Direct.com were close to 5% a little while ago, but now their rates are dropping.

I wouldn't blame this on the fed. The banks set rates according to market conditions they predict for the time period that corresponds to the loan type. That's why mortgages don't go down all the way with the recent low fed rates (fed rates can change in the short term while mortgages are figured as 7 to 10 year commitments). The prime rate hasn't followed completely either.

The banks must figure that the 0% offers draw in accounts that turn into 18% in a high percentage of cases. Other than that I don't see how they can do it, but I accept their offers and am thankful for a free market system that provides all sorts of deals to choose from.

If you over regulate the marketplace to prevent high price deals, then the businesses don't have the flexibility to also offer the "loss leader" deals. I prefer only laws against fraud, and let the informed customers refuse bad deals and accept the good ones.

Also, what is typically a bad deal might be the only way a poor credit risk can get a loan, but maybe the bad deal is still useful for that person at that time. If you over regulate, that person may not have any loan to choose from .

Wanna Bet ?

JP, you have changed your tune: You originally declared that because Advanced GDP came in at +0.6%, we could not be in a recession. The data I offered showed that this is not the case. Recessions can and do start with positive GDP.

While I cannot say for sure this is a recession, I certainly see plenty of evidence suggesting that is a strong possibility. You cannot say for sure that 0.6% = no recession, tho you also have evidence to back up your claims.

We will find out soon enough, and hence I propose the following bet: If a recession is eventually declared, and the start and finish points includes any month in the first or second quarter 2008, I win. If not, you win.

Loser buys dinner for 4, at the restaurant of winners choice (winner's and loser's and spouses included). Price is inclusive of dinner, wine, car valet and tip.

Is this a bet?

PD Quig...

Statistics are a dirty thing. They are never accurate when they are being used to describe a complex item, i.e. the U.S. economy. However, I am glad that instead of relying on economists, statisticians and actuaries who have spent years and decades of trying to capture the essence of the U.S. economy we still have people like you who will try to undo that in an attempt to make your party look better. Sorry, it ain't gonna work, but nice try.

Barry....

If it is indeed possible that a recession can be preceded by a quarter of positive GDP growth (and logic dictates that this is true), then it should be noted that the bar for which a recession be declared needs to be raised, especially if, as NBER puts it, there are multiple factors that must be considered. GDP declined, but is not negative. Unemployment declined. Industrial production and wholesale retail sales have not slowed. Therefore, the economy is not in recession. However, the last three items are very tricky to track, so we're left with GDP.

But I like your hedge on your bet. It's entirely possible that you will be wrong, but because the NBER can go back and revise the numbers, it's entirely possible that they can back at some future date and revise the numbers and call a 2008 a "recession", therefore you can win your bet. Pretty sly, but then again, you ARE an economist. ;-)

The Money Supply... Inflated? News to me

> might want to consider that your Uncle Sam and his private Federal Reserve is printing money at unprecedented speed in several different ways

Or you could check your numbers and stop listening to the <a href="http://mjperry.blogspot.com/2008/05/is-concern-for-inflation-inflated.html">doom and gloom pundits</a>:

<i>The chart above (click to enlarge) shows the growth rates (from a year ago) for the monetary base and M1 money supply since 2005. M1 has been flat with zero growth for more than 2 years, and the growth in the monetary base has been declining and is now approaching 0% growth. Given these monetary data, is the concern about inflation inflated?</i>

and comment:

<i>The price of gold is down more than 15% from the peak. The ten year bond is also forecasting lower inflation.</i>

In general, no recession. Nor is the money supply being jacked as suggested above.

To unemployed: What is your degree IN? You conveniently leave this out. If it's in a "bad subject" then it's not particularly amazing that you may be having a hard time finding a job. Tell me it's in something other than Liberal Arts, and I might find more weight in your claim, despite it being anecdotal. You're also in NY. Sorry, that whole rust belt area has been in a long, steady decline. I can grasp a resistance to leave an area you possibly grew up in, but, GASP, amazingly, this is sometimes needful if you want to succeed rather than blame the whole world for your unwillingness to MOVE.

And yes, I've BEEN in *exactly* your situation, so don't waste your time getting all high-hat about my lack of compassion. Sometimes people need a kick in the pants to fix problems in their life, and you may well be in exactly that situation yourself... or weren't you looking for solutions, but a place to whine?