It began (pdf) in December 2007.
It’s official.
Previous post: Assorted links
Next post: The Next Crisis
Our Books
Modern Principles of Economics
Launching The Innovation Renaissance
The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will(Eventually) Feel Better
Create Your Own Economy: The Path to Prosperity in a Disordered World
Discover Your Inner Economist
Good and Plenty: The Creative Successes of American Arts Funding
Judge and Jury: American Tort Law on Trial
Markets and Cultural Voices: Liberty vs. Power in the Lives of Mexican Amate Painters (Economics, Cognition, and Society)
The Voluntary City: Choice, Community, and Civil Society (Economics, Cognition, and Society)
Creative Destruction: How Globalization Is Changing the World's Cultures
Changing the Guard: Private Prisons and the Control of Crime
What Price Fame?
In Praise of Commercial Culture
Entrepreneurial Economics: Bright Ideas from the Dismal Science
Contact Us
Recession started in Dec, with two quarters of growth in between? WTF?, Uh, I mean, a bit counter-intuitive I believe.
For all intensive purposes (see unemployment statistics), 0.5% annual GDP growth is a contraction.
The phrase is “to all intents and purposes,” and it doesn’t mean what I suspect you think it means.
Doesn’t it say that December 2007 was the peak month, and that the economy was expanding then? Wouldn’t that mean it began in January 2008? Or am I reading it wrong?
Yes, the phrase is “for all intents and purposes.” I do like the idea of “intensive purposes”, though.
The “REASON” that the stock market averages increase or decrease are merely journalists expressing an opinion. Markets move and there is no definitive reason. If a movement occurs at the same time something else happens — that frequently becomes the reason.
Maybe it was India or maybe it was Black Friday or the Walmart incident or maybe people had the long weekend to figure out that they want out. Or they got pushed out via fund redemptions.
I’m confused, too. Can someone explain? From the BEA (http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=1&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Qtr&FirstYear=2007&LastYear=2008&3Place=N&Update=Update&JavaBox=no#Mid)
Percent Change From Preceding Period in Real Gross Domestic Product
2007 (3) 4.8
2007 (4) -0.2
2008 (1) 0.9
2008 (2) 2.8
2008 (3) -0.5
BTW, real GDP needs to grow at least as fast as population for per capita GDP to stay constant. This means in a country like the U.S. with significant population growth, we are actually going backwards if we’re standing still. It also means folks who want to change their talking points to say everything was hunky-dory until Dec 2007; in fact, dag-nab-it, that was the PEAK, so it must have been as GOOD AS IT GETS, or EVEN GOODER; should hang their heads in shame and slink away.
I think the point is you either have a (relatively) objective standard or you have a committee clusterfudge.
The economy has been growing below trend for a while. The IMF has a 3% standard for recession, which is dumb, but if they stick to it then at least it’s an objective standard.
If you don’t stick to an objective standard, then you also have to guess at what the committee thinks the label means and they have to guess at what we are going to think it means.
“GDI was estimated as NEGATIVE in 2007Q4 and 2008Q4. I repeat GDP and GDI are EQUAL.”
Yeah, we know. Look at q2 numbers. 2.8% is a big jump in the middle of a recession. I repeat… blah blah…
weichi,
Possibly I’m mistaken. But I don’t think so.
If I go to wikipedia and look up “recession”, here’s the first sentence:
In economics, the term recession is generally used to describe a situation
in which a country’s GDP, or gross domestic product, shrinks for at least 2 consecutive
quarters.
But then I could have written that myself as that’s exactly what I thought the word
meant.
Possibly payroll employment is a key indicator, more important than GDP, and we really
need to put most of our attention on its rises and falls but in that case why not simply say
that large organizational employment has fallen?
Is that so obscure? Is that so hard to understand?
Why is it necessary to gut the original meaning?
Also, and a little off-topic, I can’t help wondering if we should be putting all this emphasis
on payroll employment even if the subject was being discussed straightforwardly. Correct me
if I’m wrong, but isn’t the payroll survey predominately government workers?
Pretty easy to manipulate that, isn’t it? If a government wants to avoid “recession”
just hire more civil servants. Simple. Likewise any attempt to reduce the size
of the government workforce — not that I’m aware this has ever happened in the real world — is
by definition a recession.
Finally I hope you caught this, from BizzyBlog’s post:
At one point, there was some degree of economic consensus that the recession began in July of 2000
and ended in March of 2001 (2007 note: info at link was changed after publication of this post, and
references to what was just noted are no longer there). By the time the “non-partisan” (uh-huh) NBER
declared its end (third paragraph at link), the time frame had changed from March 2001 to November 2001.
How convenient.
I’ll reiterate. Up until 2006 or possibly 2007, NBER had asserted that a recession began
in July of 2000 and ended in March of 2001. Then sometime in 2006 or 2007 someone at NBER wiped
this assertion off their website and (without explanation) replaced it with the assertion that
the recession in question began in March of 2001 and ended in November of 2001.
It doesn’t matter the underlying methodology is, there’s no way to square this with “consistency”.
One more thing:
“Correct me if I’m wrong, but isn’t the payroll survey predominately government workers?”,
You are wrong. Just google “payroll employment survey”, the first link will tell you what it is.
OK, another final thing. The president of the NBER? Martin Feldstein, author of 30+ op-ed pieces in the WSJ, including Sep 2008′s “John McCain Has a Tax Plan To Create Jobs”. Not exactly an anti-free-market leftist, which I think is the implication of the “politicized” charge.
weichi,
Thank you for pointing out my misunderstanding of the nature of the “payroll employment survey.”
Somehow I had thought it was something different. Is there, or was there, an employment
survey focused only large institutions? Whatever.
Landon at JPM (who seems pretty good) examines the timing of NBER recession calls going back to 1980 based upon the history listed on their website.
“1) The January 1980 peak was announced June 3, 1980.
* Economy was in recession for 5 months and ended 1 month after announcement.
2) The July 1981 peak was announced January 6, 1982.
* Economy was in recession for 6 months and ended 10 months after
announcement.
3) The July 1990 peak was announced April 25, 1991.
* Economy was in recession for 9 months and ended 1 month *before*
announcement.
4) The March 2001 peak was announced November 26, 2001.
* Economy was in recession for 8 months and ended in *same* month as
announcement.
5) The December 2007 peak was announced December 1, 2008.
* Economy was in recession for 12 months preceeding the announcement.
The longest post-War recessions were 16 months in length and started in Nov
1973 and in Jul 1981. From the above data, it took an average of 8 months
after the start of recession before the NBER officially recognized that fact.
Additionally, the recession ended, on average, 2.5 months after the NBER’s
announcement date. Of course, there was quite a bit of variability in that
statistic. In all but the recession that started in July 1981, the recession
was actually over within one month before or after the announcement dates.”
The Economist front cover the week before last told us “all you need is cash” (when the cover at the tight in the Feb 07 credit spreads/top in REITs pronounced ‘The End of the Cash Era’). Ben Stein (a reliable contrarian indicator) is panicking that there might never be a recovery without _further_ massive government intervention. Possibly things could be worse this time, but it might make sense to start thinking about an interim low in growth and possibly also in asset markets.
We can give you the best ragnarok online zeny and best service.
it is a long time
Comments on this entry are closed.