Several economists and pundits have unequivocally stated that, since there have been no negative quarters of GDP, there is no Recession.
This group of economic observers include former CEA Chair and current Harvard Prof Greg Mankiw, economist Brian Wesbury, economist/media pundit Larry Kudlow, and USNews reporter James Pethokoukis — amongst a few others.
Here’s my challenge for both BP readers and these economic observers:
Has there ever been a recession declared by the NBER, even where there was not 2 consecutive quarters of negative GDP?
Have there been past recessions where GDP was originally reported as a positive number?
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Readers can post their answers below.
I will post the definitive answer to this in 24 hours.
According to Anirvan Banerji of ECRI, the 2001 recession, as declared by NBER, did not contain 2 consecutive quarters of negative GDP. Please see http://www.thestreet.com/b/dps/cc/20080327/columnistconversation1.html#entryId10409566.
I heard a talk by Marty Feldstein yesterday and he pretty much said GDP is worthless then painted a very dark picture of the future.
This from the guy who dates recessions.
Wikipedia, under entry Recession: For the past four recessions, the NBER decision has approximately confirmed with the definition involving two consecutive quarters of decline. However the 2001 recession did not involve two consecutive quarters of decline, it was preceded by two quarters of alternating decline and weak growth.
And for actually answering the question. I’ll happily step up to the plate.
Folks when GDP for the 3rd quarter of 1990 was first released it was 1.8% BOO-YAH how does that feel? Growth 3x what we’ve got right now.
Growth was eventually revised (in that quarter) to 0.2%, and then to -1.6% and the NBER declared the recession to have started in that 3rd quarter of 1990.
Since then GDP in that quarter revised lower to -1.9%, but revised again to 0.0% WTF? that’s right GDP is now thought to be 0.0% in the first three months of the 1990 recession.
I played in a football game once where we made five first downs to the other team’s eighteen plus; we were outgained something like 300 yards to thirty; and we completed two out of fifteen passes. We won the game 21 to nothing.
Sometimes the real data that counts is just missed, or is just not counted. Had there not been a final score we would have lost the game. We won by returning a punt, a kickoff and a fumble back for touchdowns.
I think asset values have never been measured as a part of a recession, nor have mortgage foreclosures and “walk aways” from homes. Has inflation ever been measured as part?
Finally there is the classic view: when I lose my job it’s a recession; when my wife looses hers, it’s a depression.
When things go soft, we often don’t know it for awhile.
This comment is about the 2001 recession. NBER declared the Recession to start in March of 2001, the first quarter of 2001.
Growth that quarter was first announced as +2.0% Man, 0.6% is looking positively heady.
In the next GDP advance release we were told 1q 2001 was now only 1.3% and 2nd quarter GDP was 0.7%
Imagine that, 2 full quarters of positive growth (and both better than what we’ve got now) both turned out to be negative and within a recession.
Eventually the first 3 quarters of 2001 were reported as:
-0.6%, -1.6%, and -0.3%
NBER declared those 3 quarters a recession. Story over since NBER doesn’t revise it’s own recession call.
But was the story really over? 2 years later BEA said “Whoops” Not only were those 3 quarters negative but 2000 q3 was negative as well. For those keeping track that quarter was orginally reported as +2.7% One heck of a revision.
So maybe the recession should be August 2000 to Nov 2001?
So who here really thinks 4q 2007 or 1q 2008 won’t be revised down eventually?
Defining recessions by aggregate GDP numbers, even if you believe the numbers, says nothing about where living standards are going.
If a country’s population is growing 1.5% per year, but it’s economy is growing 1% per year, it is not in any classically defined recession, but it will certainly feel like one to its citizens, as they gradually get poorer.
By the per capita GDP metric, the US is and has been in a recession since at least the fourth quarter of 2007. By the same metric, Japan’s declining or stagnant economy doesn’t look so bad, once you consider its population is declining.
“Have there been” not “Has their been”. Recessions is plural and their is the possessive form of they.
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BR: Fixed.
I teach economics and data analysis; I learn grammar, spelling and punctuation!
It’s not hard in today’s two class society and economy.
Simply stated, the top 20% of the population is doing OK and they can prop up GDP since 70% of GDP is based on consumption. While the remaining 80% of the population is feeling the recession they are too poor to make difference in GDP. If the top 20% of wage earners are 80% of total consumption in dollars who cares about the other 80% of the population.
Great analogy, Howard.
A “recession” is whatever a bunch of wise men at the NBER say it is. Therefore, “recession” is not a meaningful, scientifically-testable term.
It’s analogous to the debate over what constitutes a “bear market.” Most of the time, a 20% decline in the S&P is a good rule of thumb (similar to two quarterly declines in GDP = recession). But in extraordinary circumstances, such as the extreme volatility of the early 1930s, the “20% decline” rule was triggered multiple times, during what most would agree was a single 2.75-year bear market.
I believe the NBER should define percentage downturns and upturns in several data series which are consistent with recession and recovery. Any three of five pointing down would constitute recession; any three of five pointing up would constitute recovery.
Absent a quantitative definition, all discussion of “recession” amounts to little more than six blind men describing an elephant.
I disagree Jim.
Tune in tomorrow and see why . . .
The BEA has declared that real GDP growth for Q1 was 0.6%, and that nominal GDP growth during this period was 3.19%.
What I would like to know is how the geniuses at BEA can be so sure that they have fully factored in the effects of inflation, which is rising at an ever-increasing pace.
“This from the guy who dates recessions.”
Must make for a sad love life.
For some historical perspective, take a look at the following data from the ’73-’74 recession
(available at http://www.econstats.com/gdp/gdp__q1.htm)
Quarter GDP
1975 Q2 2.96
1975 Q1 -4.7
1974 Q4 -1.56
1974 Q3 -3.82
1974 Q2 1.16
1974 Q1 -3.42
1973 Q4 3.88
1973 Q3 -2.11
1973 Q2 4.71
Thus, you had to wait until the fourth quarter of 1974 to find out that there was a recession
Recession(s)….at least the classical definition of one will never be called one with the current administration in charge.
Don’t like the numbers?? Just change what we look at……
Remember the great lengths that this admin. went to to make sure the recession of 2000-02 was Clinton’s fault….nevermind we had that little 9/11 thing…..that sealed the deal in Bush’s court.
If the bottom is in (for the 12th straight month) then why are we still subsidizing the banks??? Say one thing….do another.
Ciao
MS
looking to an entity that is engaged in looking past the graveyard so that we see the other side of the valley is also brought to you by the same group of “thinkers” that came up with:
Downclimb
’nuff said.
Ciao
MS
These days much spending is involuntary or not cash related, such as more spending on healthcare and owner rent equivalents. These are currently producing what positive gdp we have even though voluntary spending is falling. It probably won’t be long before this comes to dominate economic ‘growth’ even as voluntary spending continues to shrink.
This thesis that you can have a recession with an expanding GDP is total dribble.
If stocks have in fact seen their bottoms, I have better things to do than debate the definition of a recession.
In 1990, the market bottomed in October. By the time the data was revised downward to reflect a recession, the market was up 20%.
KK:
Are you suggesting that the current period is similar to 1990?
Compare now and then with inflation, interest rates, P/E, sentiment, liquidity, maret breadth, etc, and where we are in the bull/bear cycle . . .
Two post-war recessions have been declared without consecutive negative quarters of GDP growth—1960-61 & 2001. Although it is worth noting that the NBER does not define a recession as consecutive negative quarters, but looks more broadly for an economic decline which most often appears in GDP, employment, etc.
hey Ross, love the Toonces reference! You remember how that sketch always ended, right? How appropriate.
Public sentiment is already well ahead of the pundidiots in terms of accepting that there is a recession. Funny that people that live and breathe finance have a harder time coming to grips with the obvious reality than your average Joe on the street. The difference is that Joe doesn’t have an interest in deceiving anybody. CNBC and the shills they have on will use whatever technical argument, no matter how obscure or irrelevant to keep from having to ditch their “now’s a great time to buy mantra.” They’re the realtors of the stock market.
Actually, according the the NBER you don’t have to have 2 quarters of negative GDP to have a recession.
The NBER definition:
“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.”
So even if – a big if – 0.6% is accurate growth, it does not rule out recession.
The 73-75 recession could be argued their was no recession to Q3 74. The Feds “beige” book forrunner was glowing about the economy all the way through the first half of 74.
This same time 7 years ago…
“We had a report last week on the Gross Domestic Product for the first quarter that showed that GDP up 2 percent, which was unexpected. That let a lot of people to breathe a sigh of relief and say, “Well, we’re probably not headed for a recession.” Then you get this report that shows there is a lot of weakness in the job market. The weakness in the job market is significant because it can have a profound impact on people’s psychology and confidence.”
It turned out that number was revised to -0.5%, a huge swing.
http://archives.cnn.com/2001/US/05/04/huntington.debrief/
a little while back barry asked we post examples of economists/moneymanagers who of have been way off the mark/should have known better on the housing and financial market… came across this guy ken fisher after seeing him touted a few times on seeking alpha as some kind of authority… http://www.forbes.com/personalfinance/forbes/2007/0226/110.html
A recession occurs when real economic activity decreases. That is, when economic activity that contributes to the welfare of the people of a country decreases, that is a recession. No other definition of a recession is meaningful.
The GDP statistic no longer measures this sort of economic activity. It is very hard to see what it does measure actually. But it certainly isn’t the economic welfare of the nation.
Positive GDP Recessions Are Typical
After the Advanced GDP came out last week at 0.6%, I was surprised to read a variety of commentary about the economy that was factually incorrect. Several pundits and economists had concluded that since GDP was positive, we therefore could not possibl…
The numbers are massaged so much that GDP is rendered practically meaningless; like the CPI. Of course we’re in a recession. But why I chose to post is that I saw the name Kudlow. He can no longer be considered an economist (not that he ever really was one. Hell of a cocaine head, though). No, Larry Kudlow is an agenda driven tool. Facts be damned. One person could have assets of a trillion dollars while millions had zero, and Larry would straight-faced claim that the average wealth was just Goldilocksarific. He is an idiot.