Odds Are, a Recession Is Coming

Megan McArdle writes:

I know I saw that recession around here somewhere . . . The economy grew at 1.9% last quarter.  Two thoughts.  First, the American economy is simply amazingly resilient--1.9% is cause for exultant celebration in a lot of European finance ministries.  And second, Barack Obama's campaign team is probably doing some serious rethinking this morning...

Megan, yesterday morning's number was bad news about the state of the economy between April and June--we had been betting that the number would be about 2.5% because of dollar decline-driven net export growth and the stimulus package. It is very nice that we continue to escape a deep recession like 1982--so far. But the odds that we are in or will soon be in an episode that the NBER Business Cycle Dating Committee will call a recession are higher today than they were before.

The recent quarter-to-quarter growth numbers are:

• 2007q1   0.1
• 2007q2   4.8
• 2007q3   4.8
• 2007q4  -0.2
• 2008q1   0.9
• 2008q2   1.9
• 2008q3   1.5*

with the Macroeconomic Associates tracking estimate of the third quarter added on to the end. It looks like we will go into the election with GDP growth averaging 1.0% per year over the past four quarters--and with GDP per capita flat over the year before the election.

That's not good for an incumbent party.

Whether the NBER Business Cycle Dating Committee will ultimately count this episode as a recession or not is still way up in the air--and, I think, depends very much on where unemployment goes next:

Comments

[mdmrjsds:]

If we can print or borrow money, give it away, and call it a contribution to GDP, why doesn't the Fed get together with congress to end this recession talk by printing enough money to give every American adult $300,000.

GDP would shoot through the roof. The housing crisis would end immediately. And the best part is that printing money has no effect on inflation or the value of the dollar, according to official Fed doctrine. :-)

2008 Aug 01 10:32 AM

[Bingo 2:]

Time for you and Greenspan to take off the blinders. We are in fact in a recession and darn close to depression. You people who stand on formal definition to determine what is going on have not been able to see what is happening around you. Open your eyes.

2008 Aug 01 11:27 AM

[Stock Gambler:]

Amen, Bingo 2. If it looks like a duck, walks like a duck, and quacks like a duck, the odds are that it is an ugly duckling versus the beautiful swan that the Fed's keep trying to convince us to believe.

2008 Aug 02 09:48 AM

[Jim D:]

What if inflation isn't the 1.1% that the official GDP deflator says it is?

What if inflation is actually, you know, measured accurately?

What if it was actually closer to the 7% CPI? Or the 14% PPI?

What would your GDP numbers look like then?

Would real GDP be down 15% for the year? 20%?

Would we have had *any* significant growth since the Shrub came into office?

Garbage in, garbage out - and the inflation number is pretty much garbage.

Unless someone would like to defend the 1.1% inflation number.

2008 Aug 03 02:08 AM