Does It Really Matter If We Call It a 'Recession'?

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

What does it mean for the economy to be in a recession? Two consecutive quarters of negative GDP growth? No, there was no such thing in the 2001 recession. The National Bureau of Economic Research’s Business Cycle Dating Committee defines a recession as “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.” There’s some judgment involved – and the depth and duration of any decline are key determinants. The 2001 recession may have been defined partly by the exclamation point at the end (the consequence of the September 11 terrorist attack). Nonfarm payrolls and industrial production have been trending lower in recent months. Real business sales and real personal income have been about flat or slightly lower, but benchmark revisions will be released Monday.

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Will the NBER eventually declare a recession? Perhaps, but so what? You already knew that growth was slow. Labor market weakness is consistent with a major restructuring in the economy. The resolution of such restructurings is largely a matter of time. There may still be some more downside this go-around, but as with the recoveries from the mild 1990-91 and 2001 recessions, the next recovery is likely to be gradual.

Comments

[GreyMzee:]

Does it really matter... ? - mainly to politicians, particularly those running for (re-) election and to those running from the history of their administration.

2008 Aug 04 03:53 PM

[carey_jim:]

In this business driven, advertisement dependent information environment we live in, it is always in the best interest of business to put a positive spin on everything.

This positive spin is called advertising and the advertisers always find a way to make everything look good, even wars and economic depressions.

A recession?

Just another word for economic pause which is:

A time to think things over, to plan the future, to celebrate past victories and to gloat over the other people's failures.

A kind of a national TGIF and feel good time. What's wrong with a recession anyway?

2008 Aug 05 10:33 AM