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Not a recession (yet).--

By one of the two main ways of determining a recession, we were NOT in a recession in the Jan-March quarter:

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.

Many analysts were predicting that the gross domestic product (GDP) would weaken a bit more — to a pace of just 0.5 percent — in the first quarter. Earlier this year, some thought the economy would actually lurch into reverse during the opening quarter. Now, they say they believe that will likely happen during the current April-to-June period. "The economy is weak but not collapsing," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group. "A recession can't be ruled out, although the stars are not lined up at this point to definitively say one way or the other."

Gross domestic product measures the value of all goods and services produced within the United States and is the best measure of the country's economic health. Voters are keenly worried about the country's economic problems and so are politicians — in Congress, in the White House and on the campaign trail.

White House press secretary Dana Perino said the administration was disappointed in the figures. "This is nothing to crow about," she said. "It is very slow growth, but it is growth nonetheless."

The housing situation turned more bleak in the first quarter, as record-high foreclosures dumped more unsold homes on the market, adding to builders' headaches. Builders slashed spending on housing projects by a whopping 26.7 percent, on an annualized basis, the most in 27 years. That was the biggest drag on the economy. Consumers — whose spending is vital to the country's economic health — turned much more cautious, also restraining overall economic growth in the first quarter. Their spending rose at just a 1 percent pace. That was down from a 2.3 percent growth rate and was the slowest since the second quarter of 2001, when the United States was suffering through its last recession. Shoppers did cut spending on such things as cars, furniture, household appliances, food and clothes.

Jon Lubin (mail):
When these figures are revised down below 0% next quarter, are you going to revise the title of your post?
4.30.2008 12:12pm
Tom Cross (www):
Some counterpoints:
Ritholtz
WSJ
4.30.2008 12:30pm
Barry Ritholtz (mail) (www):
That's only the case assuming you believe the inflation figures.

If you live in the real world, and understand that the CPI dramatically understates inflation, than the recession already started in Q4 2007.
4.30.2008 12:37pm
Matthew Dundon (mail):
Cheaper housing, quality held equal, is not a bad thing for the economy, but a good thing, because it frees income for investment in assets more productive than homes, and frees people to relinquish income in favor of activities potentially more socially productive than paid labor.

In a non-bubble environment, people will rationally choose between being renters or owners, and homes will still be able create wealth for middle-class people in the old-fashioned way: though the compelled savings of principal-amortizing mortgages and appreciation a little bit more than the rate of inflation as the population grows faster than economically-habitable land.

If we are experiencing lower consumer spending in any meaningful sense (and query with gas and food prices if we actually are) that wouldn't be bad either, because it might be getting our savings rate back in line.
4.30.2008 1:31pm
Smokey:
Recessions are as necessary to a healthy economy as breathing is to us. A recession destroys marginal businesses and allows healthy ones to flourish.

The economy has always had periodic recessions. What is different tis time is that we are approaching a major election, and many folks have a vested, partisan interest in prematurely badmouthing the economy. [In this link the recessions are the shaded areas.]

Rest assured, if a Democrat gets into the White House, the economy will suddenly start to get better [/s].

In the mean time, two consecutive quarters of negative growth is the widely accepted definition of a recession. Don't like it? Move the goal posts.
4.30.2008 1:38pm
SenatorX (mail):
Great comments, I concur.
4.30.2008 1:41pm
Virginian:
Some idiot reporter on the Today show this morning said (I paraphrase only slightly) "While the technical definition of a recession is 2 consecutive quarters of negative growth, MOST ECONOMISTS say whether or not we are in a recession is based on whether people feel we are in a recession and by that measure we are in a recession" (emphasis added).

Of course, if most people feel we are in a recession it's because idiot reporters constantly hype the bad news.

I completely agree with Smokey. I guarantee we will see an immediate, miraculous improvement in the economy as soon as (god forbid) a Democrat becomes president.
4.30.2008 1:50pm
A.S.:
If you live in the real world, and understand that the CPI dramatically understates inflation.

Uh, no. In fact, the CPI overstates, not understates, inflation.

Better economists, please!
4.30.2008 2:26pm
EIDE_Interface (mail):
Wow, so now we have the "how it feels" school of economists. Why bother even getting a degree?
4.30.2008 2:54pm
limaxray:
I'm no economist, but I personally am much more concerned about the falling value of the dollar and inflation than an impending recession. Things like the tax rebate and the constant cutting of interest rates really bother me; why are we further damaging the value of our currency because some people 'feel' we are in a recession? I would much rather run the risk of a recession and perhaps losing my job for a period of time, than have my savings dissolved when a gallon of milk costs me $20. But hey, maybe that's just my personal preference.
4.30.2008 3:55pm
Randy R. (mail):
Smokey: "Recessions are as necessary to a healthy economy as breathing is to us. A recession destroys marginal businesses and allows healthy ones to flourish."

Chauncey Gardner said much the same thing, only he used a metaphor of a garden. A tree must be pruned of it's dead branches so that it may flourish again.

Question: Why do you think a Dem president will suddenly make the economny better? If true, isn't that a good thing?
4.30.2008 4:09pm
gattsuru (mail) (www):
Why do you think a Dem president will suddenly make the economy better? If true, isn't that a good thing?


I think you missed the sarcasm. We're referring to the tendency for good economic news to be rather consistently reported as soon as a Democrat gets the front office -- see the Clinton introduction for a fairly good example, especially right as he entered office.
4.30.2008 4:37pm
Richard Aubrey (mail):
It's the Battle of The Definitions.
As with Iraq. The fight to label the fighting a "civil war" was so vicious because the planted axiom is that, once the label is affixed, we're required to go home. No further discussion is needed/allowed.
With "recession", whatever we're having is needed to be a recession--by dems--in order to bash Bush. So we're doing to the definition what is strictly forbidden in Leviticus, especially the part about farm animals.
4.30.2008 5:13pm
Smokey:
Note in the link above that the National Bureau of Economic Research, an arm of the Federal Reserve, specifically defines a recession as two consecutive quarters of negative GDP growth.

Those wondering about this phony dispute over definitions may want to refer to George Orwell. Or Humpty Dumpty: "When I use a word, it means just what I choose it to mean..."

That's not how it works. Words matter. The accepted definition of a recession has remained the same for half a century, despite the Humpty Dumptys of the left.
5.1.2008 12:29pm
JosephSlater (mail):
I'm not sure the "there's no real problem here" side has their story straight. Is it that we're not really in a recession? Or is it that we are in a recession, but that's OK because they are healthy for the economy? Or maybe we are in a recession, but only because that dang liberal media has convinced people that we're in one (you know, when that same liberal medial takes time out from bashing Obama 24/7 for Wright, Ayres, and other people he has known).

And I truly hope McCain and his supporters take up the trope that the economy wasn't really better in the Clinton years than it is now, that's only how the liberal media reported it.
5.1.2008 3:20pm