Reports of economy’s death were greatly exaggerated

I recall hearing a guest on talk radio (I forget which show) saying that a recession is defined by very specific economic indicators — and that, despite the loose use of the word “recession” by uninformed media types, those economic indicators were not present. Perhaps that’s not surprising, given that the economy is growing, something even the AP has to concede, although it paints that fact in the grimmest of terms:

The bruised economy limped through the first quarter, growing at just a 0.6 percent pace as housing and credit problems forced people and businesses alike to hunker down.

The country’s economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday. The statistic did not meet what economists consider the definition of a recession, which is a contraction of the economy. This means that although the economy is stuck in a rut, it is still managing to grow, even if slightly.

Given that the economy is still moving forward, those $600 checks the President is sending home may indeed be the difference between stalling and sliding backwards, on the one hand, and continuing that forward growth, on the other hand — just as was the case in 2001.

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  • jj

    A recession is a specific thing, with a specific definition – as most people in congress seem not to know.

    (Where do we get these idiots? Why do we keep electing them? Does anybody over the age of six really believe that congress represents our smartest, or by some other nebulous definition our ‘best?’)

    It’s really pretty simple. Two quarters in a row of negative growth equals recession. Period. If you don’t have those conditions, then by definition you don’t have a recession.

    That took ten words, Mr. Schumer, Ms. Pelosi, Mr. Reid, Ms. Boxer. What part of it did you not understand?

  • Oldflyer

    There is a perverse trend lately to re-define, or more correcctly corrupt, words to fit a particular template. Sadly, many of the people who should be most careful in how words are used are the worst offenders; certainly journalists (TIC) are high on my list of offenders.

    JJ is absolutely correct. There is a long standing, widely accepted definition of recession; and it is as he said. But the word recession has a built-in scare factor, so it is thrown around very loosely and incorrectly for political purposes.

    There are plenty of other examples. One that rankles me is the corruption of the word gay. That word had a specific meaning until it was usurped. The common usage these days certainly has nothing to do with the original meaning of the word. So-called Gays are seldom gay people, or so it seems to me. They are most often angry and militant.

    Just today there is a story that the inhabitants of the island of Lesbos, who throughout history were known as Lesbians, are now upset that their name has been hi-jacked. (I don’t know where they have been, maybe the mail is slow to Lesbos).

  • Don Quixote

    As with many terms, “rescession” has a technical and a popular meaning. We might as well be asking whether the Korean War was really a war or, technically, just a police action. When pollsters ask whether we are in a recession, they are really just asking whether people think our country’s economic health is improving or declining.

    Everyone understands the popular meaning of rescession and only economists and wordsmiths like Bookworm and her readers (and I count myself as both a wordsmith and an avid reader) worry that the technical meaning has been lost.

  • jj

    Well. If pollsters are really just asking whether people think our economy’s economic health is improving or declining, then let them ask that.

    You really don’t need to be a wordsmith to – as Mark Twain remarked: “use the right word, and not its second cousin.”

    That would be an interesting thread: words we encounter that are misused all the time, so often in fact that the incorrect meaning ends by becoming the “correct” (or at least most common) usage.

    My current candidate is “incredulous,” which for some reason judges and lawyers (at least in New York) seem to believe is a stronger form of “incredible.” I sat in an appellate hearing one day and listened to a judge decline to take an appeal, and read out – from the bench – the trial judge’s conclusion. “He not only found that incredible, he found it incredulous.” This was heartily seconded by counsel for the plaintiff, who apparently though he’d discovered a brilliant new phrase and repeated it several times.

    I had no interest so didn’t care one way or the other, but I did, of course, sit there thinking “I not only find you to be a dingbat, judge, I find you a total moron.”

    (But I didn’t say it!)

  • Oldflyer

    Don Q, I wish you hadn’t made the statement that you made.

    As Barack Obama has lectured us; words are important. But, if the meaning of words are not verifiable, then they very easily become the weapons of demagogues.

    Why should journalist and politicians use the word “recession” to describe slowing economic growth? Because they want to demagogue. They do the same thing when they characterize any reduction in the growth of government spending as “CUTS” in essential programs for the children, etc.

    We become complicit in the demagoguery when we do accept the misuse of language.

  • Mike Devx

    I agree: the word recession has a specific meaning. And we are not in one.

    However, since our population is expanding, you would expect that the economy MUST be expanding as well. If it isn’t expanding, then in real terms we are still losing ground… technical defiition of recession notwithstanding.

    Two consecutive quarters of growth less than 1% can best be described as stagnant, and can be viewed as definitely harmful. Our population is growing at a rate greater than 1% so I believe in real terms we are harmed.

    It’s like earning 2% interest on your assets while inflation is at 4%. You are LOSING, even though you are not in a deflation. When economic growth is behind population growth, we are LOSING.

    And any statistical calculation of inflation reflects only an average. Average harm or average benefit.

    Since the worst hits to our economy are in the areas of energy and food, and since poorer people spend a much greater percent of their worth on energy and food, I think you can say that for the poorer people, the EFFECT on them is that they are in a “recession”. Though the technical criteria for recession have not been met.

  • Bookworm

    That’s a good point, Mike, and one that is absolutely correct right now. The problem is that the media started using the word recession several months ago, before the food and oil prices had risen as much. I take exception to that, because I think it helped to create a panic, worsening the situation. In that way, words have tremendous power.

    I understand DQ’s point about common usage, but to the extend the media is supposed to report on facts, I do thin they should use technical terms appropriately, rather than in a common sense. You can write precisely the same story about the weakening economy (and even, if you like, about the evil George Bush), but honestly state that, “while this is not technically a recession, because a recession requires…, nevertheless….”

  • Oldflyer

    Good grief Mike D, now you are bringing all sorts of extraneous arguments to justify misuse of a technical term, as Bookworm puts it.

    If you want to talk about per capita output; per capita income; productivity; unemployment rates, etc.; that is fine. But none of those concepts are part of the definition of economic recession. The perceptions of the poor certainly play no part.

    You are mixing arguments with reckless abandon. When you say that GDP must grow at a robust rate to keep up with population growth, what you really refer to is the necessity to maintain some undefined over-all standard of living. That is not germane.

    The whole idea of tying population growth to the definition of recession is spurious at any rate. During periods of robust population growth it could well be impossible to stay out of recession–in those terms–even with what is considered strong GDP growth. It seems to me that to even enter that quagmire you would have to analyze why population was growing? What is the effect of the influx of unskilled immigrants? What is the effect of more people are living well beyond their produtive years? How do you account for these factors in determining whether GDP is growing at or shrinking in relative terms–and that is how you are advocating that it be measured. But, relative to what?

    If you start mixing and matching concepts, then concepts lose their meaning. I refer back to my original post regarding the meaning of words.

  • Bill C

    I don’t want to get into an argument over semantics. I just want to point out that it has taken extraordinary efforts by the Fed to keep our financial system from collapsing all at a time when our economy isn’t in recession. If we enter a according to Hoyle recession now or in the next 6 months you have to wonder how bad it can get. Also, does another Fed rescue of bad credits simply postpone the bubbles bursting?

    We seem to have had a series of rolling bubbles without a final flushing of the system so that financial assets approach real value. It is my belief that someday the Fed’s attempts will fail and that we have built a mountain of bad debts upon past periods of easy credit which will make the final reckoning that much worse. If this is true then we are missing the forest for the trees when we argue whether we are in recession now or not. The most important aspect of this crisis is that the Fed has prevented the market from moving to a place which would flush out the bad debt.

  • Ymarsakar

    Depressions and recessions depend on the individual person that supports the entire economy. The Great Stock Market crash destroyed people’s savings and thus destroyed the basic support of the US economy.

    It is unlikely the Feds can ever protect individuals from themselves or from the market, since the Feds are designed to protect states and the nation itself, not individuals. All they can do is to provide incentives and what not, but if people really want to throw themselves off the cliff, they’ll do it. Just like the media has succeeded in convincing people that we are going off a cliff.