When did the definition of a recession change from "two consecutive
quarters of negative GDP growth" to "not as much growth as we want"? Everyday
day I sit here and read pontifications about the US
"currently being in recession". Yet, when one looks at the numbers, not
only are we not "currently in a recession", we are not even approaching one.
It has been almost two decades since the last true recession in the US. I know we experienced slowdowns in the mid 1990's and early 2001-2002 but if we are being honest, those were just simply bumps in the road. In Q4 1990, GDP fell 3% and Q1 1991 followed with a 2% drop from there. We have not had consecutive negative quarterly growth since then.
In short, we are spoiled. Prior to the 1990-1991 recession, people had only go back 9 years in their memories to remember the last one. We are currently approaching year 19 which means there are a whole class of investors who have never actually experienced a recession in their investing lives...
So, where are we now? Gross domestic product rose at an unrevised 0.6% annual rate October through December, the Commerce Department reported Thursday, in line with expectations. For the current quarter ending Monday, economists expect growth to be flat. For Q2, economists expect GDP to fall 1%.
For all of 2007, the US economy grew at the weakest pace in five years, rising at an inflation-adjusted 2.2% rate compared to 2.9% in 2006.
The Labor Department reported that initial claims for jobless benefits fell 9,000 last week but remained at elevated levels. Also, the previous week's level was revised down by 3,000. The unemployment rate remains at historically low levels.
Inflation, (consumer prices) was revised down to a 3.9% annual rate in the quarter from 4.1% previously reported. Core prices, which exclude food and energy costs, rose at a 2.5% pace, again revised down from 2.7%.
Of those numbers, NONE, are recessionary.
Expectations of both business and economists are for the "economy to turn around" in the second half of 2008. So, if this is true, and we have flat growth in the current quarter, we are now running out of time to have a recession.
In fact, the "recession we are in but not entered into yet according to actual data" will most likely never materialize. Confusing?
Remember back in the late 1990s when people began redefining earnings and were using EBITDA instead the actual EPS? It was as if they wanted us to believe taxes and interest on debt no longer mattered. When people start to redefine metrics, they are doing so to make the current situation fit the outlook they want us to see.
This means when you read or hear people lamenting the recession we are in "due to housing", you would do best to ignore them. Housing is a significant part but not the total of the economy. They are trying to redefine what a recession actually is.
We are facing "slowing growth" not "negative". Until we get a single quarter of negative GDP growth, ANY talk of recession is just that, talk.
It has been almost two decades since the last true recession in the US. I know we experienced slowdowns in the mid 1990's and early 2001-2002 but if we are being honest, those were just simply bumps in the road. In Q4 1990, GDP fell 3% and Q1 1991 followed with a 2% drop from there. We have not had consecutive negative quarterly growth since then.
In short, we are spoiled. Prior to the 1990-1991 recession, people had only go back 9 years in their memories to remember the last one. We are currently approaching year 19 which means there are a whole class of investors who have never actually experienced a recession in their investing lives...
So, where are we now? Gross domestic product rose at an unrevised 0.6% annual rate October through December, the Commerce Department reported Thursday, in line with expectations. For the current quarter ending Monday, economists expect growth to be flat. For Q2, economists expect GDP to fall 1%.
For all of 2007, the US economy grew at the weakest pace in five years, rising at an inflation-adjusted 2.2% rate compared to 2.9% in 2006.
The Labor Department reported that initial claims for jobless benefits fell 9,000 last week but remained at elevated levels. Also, the previous week's level was revised down by 3,000. The unemployment rate remains at historically low levels.
Inflation, (consumer prices) was revised down to a 3.9% annual rate in the quarter from 4.1% previously reported. Core prices, which exclude food and energy costs, rose at a 2.5% pace, again revised down from 2.7%.
Of those numbers, NONE, are recessionary.
Expectations of both business and economists are for the "economy to turn around" in the second half of 2008. So, if this is true, and we have flat growth in the current quarter, we are now running out of time to have a recession.
In fact, the "recession we are in but not entered into yet according to actual data" will most likely never materialize. Confusing?
Remember back in the late 1990s when people began redefining earnings and were using EBITDA instead the actual EPS? It was as if they wanted us to believe taxes and interest on debt no longer mattered. When people start to redefine metrics, they are doing so to make the current situation fit the outlook they want us to see.
This means when you read or hear people lamenting the recession we are in "due to housing", you would do best to ignore them. Housing is a significant part but not the total of the economy. They are trying to redefine what a recession actually is.
We are facing "slowing growth" not "negative". Until we get a single quarter of negative GDP growth, ANY talk of recession is just that, talk.
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This article has 10 comments:
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marcm
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3 Comments
Mar 31 10:15 AM-
Bill W.
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33 Comments
Mar 31 11:16 AM-
Malkiel
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593 Comments
Mar 31 11:25 AM-
todd su
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188 Comments
My Website
Mar 31 03:23 PMthat is the point. there are no "real time" indicators. if there were, we could all trade it and predict the markets......
we only ever for sure "after" it happen. that being said, let's actually have some negative growth before we all run around in hysterics
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todd su
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188 Comments
My Website
Mar 31 03:24 PMwhere are we seeing a recession? employment? no, GDP? no, trade? no.
housing? for the 5% of defaulted subprime borrowers? yes. for the 95% remaining? no
hysterics
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Bill W.
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33 Comments
Mar 31 08:04 PMLast Auguest I bought a 100 year old house in Jacksonville fl in a short sale for 260k, the previous owner walked away from a 400k loan so i got the property as a bargain at the time, I put about 150k into the house and now it's appraised at 300k. So, my friend you are saying that housing is only 5% of the problem? I chose to differ. The loss in housing is having a domino effect that is affecting jobs, credit card debt, employment, and on and on.
Respectfully,
Bill W.
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ezduzit
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30 Comments
Apr 01 05:16 PM-
still renting
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144 Comments
Apr 01 05:49 PMI suppose that during a stong economy half our cities could get nuked and all commerce stop, yet you would say "NO. WE ARE NOT IN A RECESSION UNTIL WE HAVE TWO QUARTERS OF NEGATIVE GROWTH!!
And you could claim it for six months! You go girl! ;)
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dustbusterz
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13 Comments
Apr 17 09:59 PMso are we in a recession? i would say when you hear about this company laid off 300 people today, and tomorrow another company says they laid off or will be laying off 1600 employees and a few days later, the same thing from another employer, you have a pretty good clue your in a recession.
when food costs and rent and home mortgage payments and gas and electric are all going up at double our earnings on a year to year basis, i would say you have a more than good chance we are in a recession.
when your next door neighbor is laid off and then your sister and cousin are laid off in the same week, you can pretty well bet , we're in a recession.
When more than 50 % of people say i won't be going on vacation this year cause i can't afford the plane ticket or they arn't sure they will have their job when they come back so they stay home instead,to save money. its a pretty good bet your in a recession.
When many of us are sticking with the same old cloths to save a few bucks instead of buying that new pair of pants we know we really need this year, or when you see people wearing shoes, that are literally falling off their feet, cause they can't afford to spend the extra cash right now, for new shoes, i'd say yeah , we're in a recession. Get off your A_s and get out into the real world Sullivan, see for your self what a real recession is all about before you go writing your nonsense blog.
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dustbusterz
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13 Comments
Apr 17 10:09 PMwhen you see 20 places closing a day(businesses ) due to the economy,i'd say yeah thats recession .and its predicted that hundreds of malls will be mostly empty during the next 12 to 24 months . but no thats not due to any recession is it Sullivan???
what a Moron this guy is .