Recession

[bush_cheney2004]

...The issue at hand is that despite this being the third time that an "official" recession definition has been discussed there is still no proof that you can comprehend the definition this time around.

Sorry, but you are just going to have to wait for a recession to be defined the old fashion way. Voodoo analysis cannot change this, try as you may. 2Q08 will end soon, so cross your fingers and hope for the worst.

Damn those growing US exports!

Edited June 8, 2008 by bush_cheney2004

[msj]

Now, back to the topic of recession.

Is the US in recession? Is Canada in recession?

Well, Canada did have negative growth in Q1 2008 so it is possible and even probable (I find the lack of good statistical analysis for Canadian data to be a real problem - then I compare it to the overwhelming amount of statistical analysis in the US (some of if very good, most of it spittle) and realize maybe it ain't so bad in Canada after all.

The US continues to show positive growth in Q1 2008 but as has already been show, recessions begin with positive GDP data (as already linked to previously).

Given that US real growth is below population and productivity growth it is also clear that the current state may not yet qualify for an "official" recession but to many Americans it will still feel like one (as already linked to previously).

Of course, the real problem is that by the time a recession is officially designated it is often close to already being over.

Lately there have been some interesting discussions on these issues:

Jobs Show Recession Is Here

And this article which has many links that cover off many sides of the latest employment report:

Is this a recession and do we care?

[msj]

Sorry, but you are just going to have to wait for a recession to be defined the old fashion way. Voodoo analysis cannot change this, try as you may. 2Q08 will end soon, so cross your fingers and hope for the worst.

Damn those growing US exports!

I am hoping for the best.

But at the same time maybe the US and other countries need to have a good ol' fashioned recession to understand what the business cycle really feels like (and hopefully clean out some of the rot).

If headed towards a recession I prefer the short, quick route over the long, slow route that seems to have been occurring since the 1990 recession.

This is the funny thing: the US used to have "V" recessions, at least when it came to employment.

[bush_cheney2004]

I am hoping for the best.

But at the same time maybe the US and other countries need to have a good ol' fashioned recession to understand what the business cycle really feels like (and hopefully clean out some of the rot).

If headed towards a recession I prefer the short, quick route over the long, slow route that seems to have been occurring since the 1990 recession.

It's not going to happen that way...because of sustained growth in US exports. This weak component is missing compared to the 2001 recession. So with the devalued dollar, and absent another acute event like 9/11, it will take more hemorrhaging than usual to realize a recession.

It's not a recession until the Fat Lady sings.

[msj]

It's not going to happen that way...because of sustained growth in US exports. This weak component is missing compared to the 2001 recession. So with the devalued dollar, and absent another acute event like 9/11, it will take more hemorrhaging than usual to realize a recession.

It's not a recession until the Fat Lady sings.

Fair enough.

A devalued dollar (in spite of a "strong dollar" policy by the White House) certainly helps exports.

Exactly what the US is going to be exporting in future years is questionable though.

As for the Fat Lady singing - well some people need the comfort of being told what to think....

[bush_cheney2004]

Exactly what the US is going to be exporting in future years is questionable though[/url].

As for the Fat Lady singing - well some people need the comfort of being told what to think....

The rest is just a political exercise...grist for the election mill. It is very important that there be no recession until November 5th.

[msj]

The rest is just a political exercise...grist for the election mill. It is very important that there be no recession until November 5th.

That's right, ignore the economic reality of poor economic growth for the past several quarters (never mind past several years).

Oh, no, can't let that get in the way of political ideology.

[bush_cheney2004]

That's right, ignore the economic reality of poor economic growth for the past several quarters (never mind past several years).

Oh, no, can't let that get in the way of political ideology.

By your own admission, the cycle is normal and to be expected. The political game is just timing. Two term presidents are more likely to "reign" over a recession.

The economy really doesn't care about these arbitary pronouncements, except for any secondary psychological impact.

It is what it is.

Edited June 8, 2008 by bush_cheney2004

[Shady]

That's right, ignore the economic reality of poor economic growth for the past several quarters (never mind past several years).

I'd agree with the past several quarters, however, stating the past several years is factually incorrect.

And a slow down in economic growth is not equal to a recession. As it's been already stated, a recession is two quarters of negative growth.

[sharkman]

What is not a normal part of the business cycle is $140 oil. The mortgage crisis. $4+/gallon gas. The dropping dollar, despite the opinion it's a new policy. The banks having 2 for 1 sales on repossessed homes. I'm not looking backwards to see if we reach the threshold of a clinical recession, I'm looking forward to see how bad it will be, this is more serious than an election.

Edited June 8, 2008 by sharkman

[bush_cheney2004]

What is not a normal part of the business cycle is $140 oil. The mortgage crisis. $4+/gallon gas. The dropping dollar, despite the opinion it's a new policy. The banks having 2 for 1 sales on repossessed homes. I'm not looking backwards to see if we reach the threshold of a clinical recession, I'm looking forward to see how bad it will be, this is more serious than an election.

Don't panic....that $4+/gallon gas might be related to $140 bbl oil...just a hunch. US weak dollar policy is the defacto plan for a while (note: Canadian dollar has risen....does that help?).

Banks are repossessing homes from buyers who were never qualified to own them.

If you are old enough to remember when they gave away free dinnerware with each fill up, then you would know that this too will pass.

What me worry? - Alfred E. Newman

[msj]

I'd agree with the past several quarters, however, stating the past several years is factually incorrect.

Poor choice of words.

What I meant is that things have not been all that rosy for the past few years when one digs deeper into the economic reality:

- Stagnant wages aren't good for people

- Jobless rate recovery hasn't been that great for men

- Employment cycle has been poor compared to prior periods

- the trend in employment has been unfriendly for quite a while now

- MEW (mortgage equity withdrawals - that's where people use their home equity as an ATM - seemed like a good idea at the time but isn't so pleasant when house prices stop going up and then decline) added to GDP growth in prior years

And a slow down in economic growth is not equal to a recession. As it's been already stated, a recession is two quarters of negative growth.

I have posted this many times already. Go read post #346 carefully for why the two quarters rule is the lay person's rule rather than any official rule.

[msj]

Earlier in this thread (probably in the mid to high teens in terms of pages) someone said that the current economic conditions were no where near as bad as the early '80's or early '70's.

I should have given that comment more thought since it is an unfair comparison of apples to oranges given the ways that inflation and unemployment are measured today versus then.

Barry Ritholtz finally calls "BS" on this type of apples to oranges comparison:

Hedonically-Adjusted, Well-Spun, Nominal Misery Index

The way Inflation and Unemployment are measured today versus 30 years prior makes this an apples & oranges comparison. Merely showing 2008 versus 1973 is nonsense (see the chart of the misery index, below via the WSJ).

Why? If we were measuring Inflation & Unemployment the way we did in the 1970s, we would see unemployment much closer to U6 Unemployment levels of 9.7% (versus the popularized headline inflation level, U3 now at 5.5%); the inflation measures would see an greater differential -- CPI might be closer to 10+.

That would put the Misery Index somewhere between 17 and 21 -- pretty close to the 1970s highs.

Edited June 9, 2008 by msj

[August1991]

Barry Ritholtz finally calls "BS" on this type of apples to oranges comparison: ...

msj, you're just not going to give up on this, are you? You have a pre-determined conclusion and regardless of anything, you're going to find the evidence to support your conviction.

That's a bad way to do any kind of investigation and it's certainly not the scientific method.

-----

The labour market today is nothing like the labour market in the 1970s when women and baby boomers were massively entering the labour force and looking for jobs. Now, the early retiree boomers are leaving and female participation rates, after hitting historic highs, are now subsiding.

IOW, unemployment is at 30-40 year lows and it will be a seller's market for the foreseeable future.

In the same vein, we are far, far from inflation rates of the early 1970s - by whatever measure you want to choose. I don't deny that the US economy faces problems now but msj, you seem to have a preconceived view of the US economy (hardly a good approach) and it also appears that your view is rather dated.

This latest claim about unemployment - obviously false - should be the indication to look elsewhere. Go ahead and criticize the US Fed, Bush Jnr and Wall Street. Argue that the US economy is about to collapse into an abyss of debt and phoney money and fake statistics. But please make your arguments with an open-mind.

Edited June 9, 2008 by August1991

[msj]

msj, you're just not going to give up on this, are you? You have a pre-determined conclusion and regardless of anything, you're going to find the evidence to support your conviction.

That's a bad way to do any kind of investigation and it's certainly not the scientific method.

-----

The labour market today is nothing like the labour market in the 1970s when women and baby boomers were massively entering the labour force and looking for jobs. Now, the early retiree boomers are leaving and female participation rates, after hitting historic highs, are now subsiding.

IOW, unemployment is at 30-40 year lows and it will be a seller's market for the foreseeable future.

In the same vein, we are far, far from inflation rates of the early 1970s - by whatever measure you want to choose. I don't deny that the US economy faces problems now but msj, you seem to have a preconceived view of the US economy (hardly a good approach) and it also appears that your view is rather dated.

Seriously, if you want to have a discussion about this then lets discuss it without the BS "pre-determined conclusion" and accusations of me having a closed mind.

I have reached my conclusions based on the evidence that I have been presenting for the past several months.

We both know that the US does not measure inflation the way they used to. They made adjustments to their system in 1983 and 1998. I have already linked to this previously.

We both know that some economists have made adjustments in order to get a better read on what inflation would be like today if we used the same system as they used in the past.

We also know that the way the US measures employment is not the same as in the past and we know (or at least should know) that this measurement is not related to women entering the work force blah blah blah. That is a smokescreen.

The methodology has changed and that is at the heart of this matter.

Indeed, back on May 11, 2008 you even agreed that the inflation methodology had changed:

I'm not "fighting against the transparency in government statistics". I just feel that changes in the CPI methodology have made it more accurate not less.

So, there we go - you admit that there have been changes to the inflation methodology.

Clearly this means that the misery index is comparing apples to oranges if one looks at pre-1983/1998 to today (I am not arguing accuracy here - only that the three periods are different).

So, really, you have complained about my post for this reason:

This latest claim about unemployment - obviously false - should be the indication to look elsewhere. Go ahead and criticize the US Fed, Bush Jnr and Wall Street. Argue that the US economy is about to collapse into an abyss of debt and phoney money and fake statistics. But please make your arguments with an open-mind.

This is the heart of the matter (I bolded it). In particular, the part about Bush.

I don't recall placing much blame on Bush.

Fair enough, I have linked to articles and statistics that point to the economic climate under his Presidency as not being very good. But you will have to take that up with the particular statistics that I have linked to.

I am mostly unhappy with the Fed but that is due to their lax regulations on investment banks and their looseness wrt moral hazard. You have agreed with me to some extent on the moral hazard part and it should be self-evident by now that regulations have been lax (or maybe you would prefer to see if Lehman goes under before passing judgment?).

Wall Street deserves praise and blame at different times for different things so I don't see any point going into more detail on that.

The point is, August1991, I have been one of the few on here who has backed up his opinions with cold hard facts and with links to articles that are well reasoned.

I tend to avoid the headlines and, instead, dig into the meat of the particular stat (or at least the articles I link to do this).

That is as close as this thread is going to get to the "scientific method."

If you were to do the same thing then maybe I would take your claims seriously, but, frankly, you don't do anything like this which is really too bad as it would be nice to have an intelligent discussion on this matter rather than the same old political bluster and spin from you and your buddy BC2004.

Oh, and one more thing - stop misrepresenting me on my opinion of this recession.

I still think we are looking at a mild "muddle through" type recession that John Mauldin has been discussing (and for which I have linked to in the past).

This is a far cry from the "the US economy is about to collapse into an abyss of debt and phoney money and fake statistics" claim that you keep trying to stick to me.

Edited June 10, 2008 by msj

[msj]

For interests sake: Why It’s Worse Than You Think

A little article from the MSM.

[msj]

And one more article that looks at some of the stats that the NBER looks at when determining a recession.

Remember, NBER talks about a recession as being:

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.

Anyway, here's the link: Trends in Key Recession Indicators

[msj]

msj, you're just not going to give up on this, are you? You have a pre-determined conclusion and regardless of anything, you're going to find the evidence to support your conviction.

That's a bad way to do any kind of investigation and it's certainly not the scientific method.

-----

The labour market today is nothing like the labour market in the 1970s when women and baby boomers were massively entering the labour force and looking for jobs. Now, the early retiree boomers are leaving and female participation rates, after hitting historic highs, are now subsiding.

IOW, unemployment is at 30-40 year lows and it will be a seller's market for the foreseeable future.

Well, I have looked up how the BLS has reported things over the years and came up with this: Recent Changes to the Survey

Clearly changes have been made.

In this case it appears that there is a difference in methodology between after the 1967 - 1994 period and then again some changes in 2003.

Skimming the website I really don't see where women entering the workforce and baby boomers entering the workforce comes in as relevant to the original point.

The point still remains - there is clearly a difference in methodology between various time periods.

If people want to make use of the "misery" index then they should clearly identify this fact.

It is likely that if current methodologies were applied retrospectively (if that were possible) then the Nixon/Ford/Carter years may not have been as bad as we thought they were.

Alternatively, if the old methods were applied to today then maybe our current view of the economy isn't as rosy as we think it is.

At any rate, for a closer to plain language look at some of the more recent changes, and some differences between the household survey and the payroll survey, go to this link.

[sharkman]

It seems there are some whose attitude seems to be that we can will a recession away with positive thinking or showing a lack of concern. I suppose it has always been that way.

Those in government are usually leading this charge, and the enemies of whatever administration focus on talking up the bad stats. I have read that the US economy depends on its consumers for spending growth more than other economies, so I suppose the fight over the consumers confidence can have real effect.

But the underlying health of an economy can not be ignored.

[White Doors]

and yet, the sky hasn't fallen!

[msj]

and yet, the sky hasn't fallen!

Who said it was falling?

We're talking about a slow down in the economy; not some kind of world war.

Although, I suppose for those Americans who have lost their homes in the past year, and the many more who will lose their homes in the next year or two, then it may feel like the sky is falling for them, individually.

[sharkman]

I am of the opinion that this recession may turn into a major shrinking of the US economy permanently. I'm afraid I have little in the way of education in economics, and you know what they say about a little knowledge being a dangerous thing!

I heard on the news today that in the US, 8-9000 are losing their homes every day. This has never happened before, and I think it's only the beginning.

[bush_cheney2004]

I am of the opinion that this recession may turn into a major shrinking of the US economy permanently. I'm afraid I have little in the way of education in economics, and you know what they say about a little knowledge being a dangerous thing!

One would be hard pressed to shrink the US economy as long as positive growth continues.....i.e. no recession yet.

I heard on the news today that in the US, 8-9000 are losing their homes every day. This has never happened before, and I think it's only the beginning.

No, actually it's the middle. It is no surprise that the US market still has to work through all those stinky sub-prime mortgage products with time bombs that blow up like clockwork. People who are upside down on their mortgages tried to get something for nothing.

http://money.cnn.com/2008/06/05/news/economy/foreclosure/

[sharkman]

I subscribe to the 6 month theory for recessions, and the US is officially in a recession now, although you won't know it for another couple of months.

In one week about 60,000 people lose their homes. That is not a minor challenge that will pass in short order. It could take a decade to recover from.

[bush_cheney2004]

I subscribe to the 6 month theory for recessions, and the US is officially in a recession now, although you won't know it for another couple of months.

OK..we will put you down for June 2008 as the beginning of the "recession". But please note that current economic metrics do not support such a conclusion...officially.