Thursday, July 31, 2008

NO RECESSION

WASHINGTON -- The U.S. economy doubled its speed in the spring, driven by higher exports, falling imports, and rising spending by consumers given tax rebates meant to neutralize the housing slump. Gross domestic product rose at a seasonally adjusted 1.9% annual rate April through June, the Commerce Department said Thursday in the first estimate of second-quarter GDP (see chart above, recessions shaded).

18 Comments:

At 7/31/2008 9:16 AM, Blogger juandos said...

Thanks for that link Professor Marm...

 
At 7/31/2008 9:26 AM, Anonymous Anonymous said...

I wonder if the Commerce department is staffed using the same hiring criteria as the Justice department...

 
At 7/31/2008 9:43 AM, Anonymous Anonymous said...

You're kidding me! :-)

The recession started December 2007.

 
At 7/31/2008 9:46 AM, Blogger Ironman said...

No recession, pending more data revisions, that is! If the NBER does call a recession for this period, my best guess is they fit it between October 2007 and April 2008, with the greatest likelihood that they call the start month in November 2007.

 
At 7/31/2008 10:27 AM, Blogger juandos said...

Good one anon @ 9:43 AM... LOL!

 
At 7/31/2008 11:13 AM, Anonymous Anonymous said...

The interesting thing, juandos, is that the linked WSJ blog post was time stamped at 8:31 am. The BEA data was embargoed until 8:30 am. Nice work if you can get it.

I wonder if Sudeep Reddy is channeling the Federal Reserve for the WSJ like Greg Ip did. Rex Nutting at Marketwatch.com didn't figure it out until a 9:01 time stamp.

Why is the Carpe Diem time stamp GMT-6 hours? Flint, Michigan is GMT-5 hours the last time I checked!

 
At 7/31/2008 11:43 AM, Blogger juandos said...

Yeah, anon @ 11:13 AM I had noticed that the clash of credible sources here was just to funny...:-)

"Why is the Carpe Diem time stamp GMT-6 hours? Flint, Michigan is GMT-5 hours the last time I checked!"...

Hmmm, I've not checked but I wonder if that time discrepancy has something to do with the time clock on the blogger servers?

Just the odd thought...

 
At 7/31/2008 2:24 PM, Anonymous Anonymous said...

Does anyone believe that the implicit price deflator (the inflation component of GDP) was only 1.1% annualized? Is that because import price inflation is off the charts?

3.0% nominal growth less 1.1% deflator equals 1.9% real growth.

Wow. That is the lowest quarterly reading in the 21st century. Seems like fantasy to me when headline CPI is running ~5.0% and the personal consumption expenditures deflator is running 4.2%.

 
At 7/31/2008 7:32 PM, Anonymous Anonymous said...

If growth by stimulus created prosperity then Zimbabwe would be the most prosperous nation on earth.

Mr Perry is a Mugabe economist.

 
At 7/31/2008 8:05 PM, Anonymous sam said...

just another opinion: Nouriel Roubini | Jul 31, 2008
"the revisions of 2005-2008 GDP figures now show that the economic recession may have started in Q4 of 2007 – rather than Q1 of 2008 – as GDP contracted at the annualized rate of 0.2% in that quarter. While Q1 of 2008 was positive (+0.9%) it is clear that the economy was already into a recession in Q1. The reason why the recession started in Q4 of 2007 or – at the latest in Q1 of 2008 – are clear. Let me elaborate them…


First, the NBER does not use the popular press definition of a recession as two consecutive quarters of negative GDP growth. Thus, the fact that Q1 GDP was positive does not prevent the NBER from eventually finding that a recession did start in Q1.


Second, monthly GDP figures (from MacroAdvisers) show that GDP contracted in the February-April period; thus on monthly basis the economy started to contract as late as Q1 while the quarter-over-quarter comparison between Q4 and Q1 was still marginally positive.the NBER definition of a recession emphasizes a variety of variables in addition to GDP whose contraction is a signal of a recession. According the NBER you get a recession when you have a “significant” decrease in activity over a sustained period of time. The declines would be visible in GDP, payrolls, production, sales and incomes.

All these four indicators of a recession – in addition to GDP - peaked and started to contract between October 2007 and February of 2008. For example employment in the private sector has fallen for seven months in a row (since January) and total NFP employment has fallen for six month in a row (since February). The other three variables have also started to contract as late as Q1 of 2008. So, based on these criteria the economy entered a recession possibly as early as Q4 of 2007 or, more likely and certainly, no later than Q1 of 2008.


In summary, if it walks, quacks and ducks like a recession duck it is a recession duck. We are in a recession now!"

 
At 8/01/2008 5:18 AM, Blogger OBloodyHell said...

> the NBER does not use the popular press definition of a recession as two consecutive quarters of negative GDP growth.

Doc, what is this?

I thought that was the economist's definition, not a "popular press" definition.

Please identify the corrected concept for *economists*.

Also, since the "popular press" has been calling it a recession for half a year, despite the until-recently revised numbers being nothing BUT positive, one has to question this description entirely. But I'd like the Doc to identify if sam is full of it or not, as I suspect he is.

 
At 8/01/2008 9:09 AM, Blogger juandos said...

Hey OBH, your comment: "I thought that was the economist's definition, not a "popular press" definition.

Please identify the corrected concept for *economists*.
"...

I too wonder why there isn't something definitve besides what NBER offers...

Then there is this from News Busters: AP, Bloomberg, and Some Economists Defining Recession Upward...

The business press's recession obsession continues:

A couple of weeks ago, in the wake of the initial first-quarter GDP growth reading of 0.6%, Rex Nutting at MarketWatch.com entertained us with the notion that an economy can be in a recession even while there is real, if anemic, economic growth.
Today, Jeannine Aversa of the Associated Press, with the help of a number of economists, told us that we can have a recession if growth is better than anemic -- even above 1.5%.
Steven Matthews of Bloomberg went even further, as he assumed that we're in one now ("U.S. Recession to End by September, Business Economists Say"). (there's more)

 
At 8/01/2008 3:34 PM, Blogger bobble said...

NBER is the official arbiter of U.S. recessions (how they got that privilege, i don't know). from what i've seen, both the press and economists use the NBER recession calls.

as mentioned above, "The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP" so you can forget waiting for that to happen. on the other hand, NBER tends to call recessions *after* the recession is over. so we may not hear from them for a long time.

in the mean time we can squabble amongst ourselves whether it is ofically a recession or not :o]

does it really matter?

 
At 8/02/2008 2:37 AM, Blogger OBloodyHell said...

> does it really matter?

Attitude always matters in the market. People who are defeatist and put a dark cloud over things which aren't by any measure even vaguely "bad" have two bad effects:

1) People plan and act differently when things are on a downturn vs. an upturn. And this is correct.

2) There's this oft-told tale of "The Boy Who Cried 'Wolf!'" which seems distinctly relevant.

Then there are the political ramifications. The party in power tends to get blamed for the state of the economy. If people perceive it to be bad, it is bad for them, if it is good, it is good for them. All things considered, I'd like to make sure it doesn't get worsened by "The Wonder of Hope And Change (for the worst)" -- somehow they keep leaving out that last part.

I'm not willing to lie about the state of the economy, but this constant harping on how horrible it is when it's barely even "tight" is simply not good by any rational measure.

 
At 8/02/2008 7:23 AM, Anonymous bob wright said...

OBH:

Two consecutive quarters of negative GDP is a rule of thumb.

this graph

shows that during the 2001 recession the U.S. did not experience 2 consecutive quarters of negative GDP.

Around the time of the 2001 recession there was however 3 out of 5 quarters of negative GDP and the recession started after we had 2 quarters of negative GDP.

 
At 8/03/2008 5:18 AM, Blogger OBloodyHell said...

> Two consecutive quarters of negative GDP is a rule of thumb.

By your subsequent commentary it's still an out and out lie to call this a "recession" -- we have had at most 1 out of the last 5 quarters currently suggesting negative growth, and that only after a late revision. Further, subsequent quarters show an obvious uptick at this point.

 
At 8/04/2008 12:02 AM, Anonymous Anonymous said...

I wonder if the Commerce department is staffed using the same hiring criteria as the Justice department.If growth by stimulus created prosperity then Zimbabwe would be the most prosperous nation on earth.
=====================
johnson789
NEW, NEW, NEW

NEW, NEW, NEW

 
At 8/05/2008 6:00 AM, Blogger Barry Ritholtz said...

OK, kids, I know I am preaching to a confirmation bias group of people who do not want to belive this is a recession, but:

You need to understand the definition of what a recession is. If you are using 2Qs of negative GDP, well then, you congratulations for still living in the 1970s.

For the more modern amongst you, see this:

Business Cycle Expansions and Contractions
National Bureau of Economic Research
http://www.nber.org/cycles.html

And for the rare and curious amongst you, read this:

Recessions Often Begin With Positive GDP Data
http://bigpicture.typepad.com/comments/2008/05/positive-gdp-re.html

 

Post a Comment

<< Home