World Economy still Contracting.

[drkitten]

So all in all, I just think things are not going to be rosy anytime soon ... and trying to put a point in time when this particular recession does indeed end won't be so easy. Is that being one of doom and gloom?

Yes.

You seem to believe that a recession ending means that things are/will be rosy. Therefore, if things aren't rosy, we're not out of the recession yet.

That's not how economists think, and not what the word "recession" means. In the same sense that Chrysler is now out of bankruptcy, but is still not yet a healthy and profitable company. But to claim that Chrysler is still in bankruptcy is either ill-informed or outright dishonest.

No one (or at least, no one with any sense) has been saying that things will be rosy as soon as the economy enters recovery. The phrase "jobless recovery" has traditionally been applied to the rather anemic recovery of 1990-1, and has been applied to the expected recovery from this one for at least a year now, for precisely the reasons you mention.

But that doesn't mean that you can't identify when the recession ends. The recession ends when things stop getting worse. It really is that simple.

 

[Francesca R]

I think we need (in the present situation) a much broader look at what we should call an end to the recession. Especially with regard to employment.

It is generally informed guesswork until some time after the event. The NBER business cycle dating committee (for the US) admits as much.

Q: Typically, how long after the beginning of a recession does the BCDC declare that a recession has started? After the end of the recession?
A: Anywhere from 6 to 18 months. The committee waits long enough so that the existence of a recession is not at all in doubt. It waits until it can assign an accurate date.

http://www.nber.org/cycles/recessions_faq.html

ETA--Incidentally, this time round the declared peak of the previous expansion (Dec 2007) was about the same time that employment started to fall and the unemployment rate troughed just below 4%, so it is concurrent. Whether the unemployment rate is a lagging indicator or not, I think that most financial market participants regard the BLS employment report as just about the most important concurrent economic indicator there is.

 

[Just thinking]

Yes.

You seem to believe that a recession ending means that things are/will be rosy. Therefore, if things aren't rosy, we're not out of the recession yet.

The term "rosy" wasn't meant to mean all great and perfect ... it was hyperbolic. But I do believe that we can be in a state of stagnation near the current bottom (if it's a bottom) for some time, especially if jobless numbers stay high. It also concerns me when we hear some economists jumping up and down over what at this time may be nothing more than economic statistical noise.

 

[drkitten]

The term "rosy" wasn't meant to mean all great and perfect ... it was hyperbolic. But I do believe that we can be in a state of stagnation near the current bottom (if it's a bottom) for some time, especially if jobless numbers stay high. It also concerns me when we hear some economists jumping up and down over what at this time may be nothing more than economic statistical noise.

The only problem is the bathwater-to-baby ratio. Yes, sure, "some economists" are idiots. On the other hand, if you compare that to the number of idiotic "business reporters," the number of stupid economists dwindles to near zero.

But what you explicitly proposed was a complete redefinition of how business cycles are measured by the professional economists -- just to shut up a few stupid columnists?

Isn't that like outlawing alumninum because your neighbor keeps throwing beer cans into your yard?

 

[quarky]

Why does economics remind me of homeopathy?
drkitten, you have much confidence and eloquence in your stance.
Yet,

you don't really have any idea what you're talking about, do you?

 

[Just thinking]

The only problem is the bathwater-to-baby ratio. Yes, sure, "some economists" are idiots. On the other hand, if you compare that to the number of idiotic "business reporters," the number of stupid economists dwindles to near zero.

But what you explicitly proposed was a complete redefinition of how business cycles are measured by the professional economists -- just to shut up a few stupid columnists?

Isn't that like outlawing alumninum because your neighbor keeps throwing beer cans into your yard?

Even though you may find this hard to accept, I'm merely trying to be cautious, and not consider us to be out of this mess until we're pretty much under way. A sailing vessel caught in the doldrums may still drift in the desired direction ... that doesn't mean they are under way.

 

[drkitten]

Even though you may find this hard to accept, I'm merely trying to be cautious, and not consider us to be out of this mess until we're pretty much under way. A sailing vessel caught in the doldrums may still drift in the desired direction ... that doesn't mean they are under way.

There's cautious, and then there's psychosis.

You're concerned that a sailing master might not be able to tell the difference between drifting and being under way. As a result, you want to throw out all the navigational charts that tell us where we are.

In your own words:

we do need to carefully re-examine just what we decide to use as a metric for calling an end to this recession.

Why would we want to do this? "Recession" is a clearly defined term with a clearly defined meaning in terms of a set of clearly-defined metrics. Somewhat oversimplifiedly, it means a sustained and widespread economic contraction.

This means that when the economy is no longer contracting, we are no longer in a recession.

What's the problem with that definition?

Oh, yeah,...

I just think things are not going to be rosy anytime soon

No one's disputing that. But no one said that the end of the recession means that things will be instantly "rosy."

Technically one can say the recession is over with 2 quarters of growth, but when you're economically at or near bottom, that's not so hard to do.

Well, yeah. That's the whole point. When you're "at or near bottom," you're no longer falling -- and the recession is defined as the contraction or falling phase.

I'm sorry,... but just because you don't understand what words mean is not reason for those of us to do to change our terminology.

 

[Just thinking]

Well, here's another article hinting at changing metrics, at least regarding unemployment ...

In sum, given the current magnitude and uptrend of the unemployment rate, we believe that it would be more appropriate to view this metric as a leading indicator instead of a lagging one, at least until the macro-economic fundamentals normalize. Consequently, we believe that the rising unemployment rate will deteriorate consumer confidence, reduce labor income, exacerbate the housing market, endanger the banking system, and attenuate consumer spending. All of this, of course, will put great pressure on GDP for quite some time.

 

[Francesca R]

But I do believe that we can be in a state of stagnation near the current bottom (if it's a bottom) for some time, especially if jobless numbers stay high.

Well yes, but that's like me saying that I believe that "we" can be in a state of deflation, especially if the core consumer price index keeps going lower, or that the S&P500 is unlikely to go gangbusters from here, especially if it stays below 1,000. It's kind of a non-statement. (I used to see technical analysis that offered startling insights such as "only a move through the important 52.00 barrier will allow the market to reach levels above 52." No **** . . .)

 

[Just thinking]

So then what do you call that condition? ... a recovery? Certainly not. Would you say that the recession is over? Hardly, even though by drkitten's definitions it would have ended.

I feel most folks (and many economists) would call it a continued recession ... especially if things stay in this depressed economic state.

Also, me thinks you take things a bit too literally here ... "I used to see technical analysis that offered startling insights such as "only a move through the important 52.00 barrier will allow the market to reach levels above 52." No **** "

You know that means once breaking $52 it has much higher upside potential than it would otherwise.

 

[drkitten]

So then what do you call that condition? ... a recovery? Certainly not.

Yes, by definition. If the economy has stopped contracting, we've moved into the recovery.

No one said the recovery would be "rosy." Or quick.

Would you say that the recession is over? Hardly, even though by drkitten's definitions it would have ended.

So when do you expect to "feel" the recesssion ended? Bear in mind that it took a fairly long time for the market to return to 1929 levels -- the '29 peak wasn't again equalled until the mid 50s. If you think that the "recession" lasts until we've regained all that we've lost,.... well, that's simply unreasonable.

Most economists (and laypeople) would say that the recession has ended (and the recovery has begun) when things stop getting worse and start getting better. And, yes, 1% GDP growth per year is "better." If you're suggesting instead that the recovery won't start until we start getting better "quickly," you're just changing a well-defined term for an ill-defined one. How fast is "quickly"? 1%? 2%? 4%? 10%? And if you set the threshhold at 2%, does that mean we're still in the recession if growth comes in at 1.96%?

 

[Just thinking]

Yes, by definition. If the economy has stopped contracting, we've moved into the recovery.

Well, then I guess that this is where we disagree ... for I feel that we should get back at least 25% or so from where we were before the recession began to where things bottomed out. Less than that is not enough (IMHO) to be certain that we just didn't over extend ourselves too quickly. And that includes more than just the stock market ... in this case housing foreclosures, unemployment, GDP, consumer spending/confidence, etc. Staying at the bottom (or near it) to me isn't recovering ... it's just standing still.

So when do you expect to "feel" the recesssion ended? Bear in mind that it took a fairly long time for the market to return to 1929 levels -- the '29 peak wasn't again equalled until the mid 50s. If you think that the "recession" lasts until we've regained all that we've lost,.... well, that's simply unreasonable.

I pretty much think I answered that above.

Most economists (and laypeople) would say that the recession has ended (and the recovery has begun) when things stop getting worse and start getting better. And, yes, 1% GDP growth per year is "better." If you're suggesting instead that the recovery won't start until we start getting better "quickly," you're just changing a well-defined term for an ill-defined one. How fast is "quickly"? 1%? 2%? 4%? 10%? And if you set the threshhold at 2%, does that mean we're still in the recession if growth comes in at 1.96%?

Well, you set it at 0% ... does that mean 0.1% growth is a recovery ... or just statistical noise, and will be shown as actually -0.2% when revised the next quarter? Again, I think it's going to take more than something as simple as you put it.

From Wikipedia we find ... In the United States the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER defines an economic recession as: "a significant decline in [the] economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales."[8] Almost universally, academics, economists, policy makers, and businesses defer to the determination by the NBER for the precise dating of a recession's onset and end.

So even here we see that dating a recession is more complex than you described.

 

[drkitten]

Well, then I guess that this is where we disagree ... for I feel that we should get back at least 25% or so from where we were before the recession began to where things bottomed out.

Well, good. That's your opinion.

Uniquely yours, as it's shared by no one else in this spiral arm of the galaxy, as far as I can tell.

Since economists need to talk to other economists much more than they need to talk to you,... I suggest we leave the terminology where it is, where everyone except you understands it.

Well, you set it at 0% ... does that mean 0.1% growth is a recovery

Yes, because a recession is defined as a sustained drop (two or more quarters).

; if it goes up, then down, then up, then down, we're out of the recession.

From Wikipedia we find ... In the United States the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER defines an economic recession as: "a significant decline in [the] economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales."[8] Almost universally, academics, economists, policy makers, and businesses defer to the determination by the NBER for the precise dating of a recession's onset and end.

So your own source says you're wrong. When the decline is over, so is the recession.

So even here we see that dating a recession is more complex than you described.

No, we don't.

 

[Emperor_Gestahl]

Isn't this semantic argument a bit unnecessary? GDP shrinking but by less than last quarter doesn't signal the end of the recession by either of your definitions.

I think the current levels of the stock indexes are leading a lot of people to speculate that the worst is over, I personally think even if we do get a tiny bit of GDP growth in Q3 the indexes are vastly overvalued currently. The dollar is still well up from it's lows before the crash which makes the market recovery this last 5 months seem even more extreme to me. If the dollar forms a bottom or rallies from here this equity boom will be in trouble.

Recession over or not, I see turbulence ahead in the short-term.

 

[GreyICE]

Lets use a different term to define this economy. I propose 'mess.' I think most of the people in this arm of the spiral galaxy will agree that broadly defining this economy as a mess is quite accurate.

 

[drkitten]

Isn't this semantic argument a bit unnecessary? GDP shrinking but by less than last quarter doesn't signal the end of the recession by either of your definitions.

Depends on where you are, doesn't it? The latest numbers coming out of France, German, and Japan have shown GDP growth for those particular countries.

Is the recession "over" for those countries? The economists say yes, the governments of those countries say yes, and the financial press says "yes." I don't think anyone with sense is saying that the economic crisis is over in those countries and that things are "rosy," (if nothing else, they're still hobbled to the dead whale that is the US economy).

But one question that they will have to face -- and this part of why the semantics matter -- is what to do about stimulus packages. All three of the major economies that are now in "recovery" invested heavily in stimuli, which most economists consider to be one of the reasons that they're recovering faster than the rest of the world. They took the appropriate measures and they seem to have worked. Can those three now afford to cut back on stimulus yet? Can those three afford not to cut back on stimulus yet? Knowing with confidence that the economy is no longer "falling" is going to be a key factor behind that decision.....

 

[rjh01]

One problem with NOT cutting back on stimulus measures is that this may increase imports and thus foreign account debt and maybe decrease the value of the local currency.

If they do cut back on the stimulus then the countries may have back into recession.

 

[GreyICE]

One problem with NOT cutting back on stimulus measures is that this may increase imports and thus foreign account debt and maybe decrease the value of the local currency.

If they do cut back on the stimulus then the countries may have back into recession.

Decreasing the value of local currency is usually, a good thing, except for the rich. Hence why there's such a fetish about a strong dollar, but really, strong currency isn't all that and a bag of chips. Let it fall, it'll help the economy.

 

[egslim]

Lets use a different term to define this economy. I propose 'mess.' I think most of the people in this arm of the spiral galaxy will agree that broadly defining this economy as a mess is quite accurate.

It's all relative.

Say we've had 5% shrinkage, that sets us back to the level of about 2006. Which, compared to as recently as 2005, still looks pretty good.

The state of the financial system may be another matter, though.

 

[GreyICE]

It's all relative.

Say we've had 5% shrinkage, that sets us back to the level of about 2006. Which, compared to as recently as 2005, still looks pretty good.

The state of the financial system may be another matter, though.

How's the population changed since 2005? Lost 5%? FAIL