What is a Recession?

According to Hoyle“…

Recession Two consecutive quarters of decline in real GDP is commonly taken to be a recession. The National Bureau of Economic Research, a private organization, effectively decides when recessions occur, however, and the actual dating process is determined by judgment rather than a formal rule.

So which is it? Is there a firm definition, or is it completely up to judgment? I’d say both. Examining the clinical data, according to the BEA:

  • 2007 Q4 GDP — 0.6%
  • 2007 Q3 GDP — 4.9%
  • 2007 Q2 GDP — 3.8%

That doesn’t look like the classical definition of a recession to me. It looks like growth of the GDP is slowing, but not in decline. The economy is still growing, just not as fast. It’s very interesting that you hear so much about us being in a recession, or headed for a recession, or whatever. It’s almost as though someone is trying to convince us that there is a recession, huh? I think that’s where judgment perception comes in. It seems as though we are in a recession, mostly because everyone perceives we are. And that’s probably the only thing that really matters. I just hope that no one is using that perception for something like political gain.

Nah, that would never happen.

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5 Replies to “What is a Recession?”

  1. It’s quite easy to perceive we’re in a recession when everybody’s struggling to make it, though, ya know? the company I used to work for was taken off the NYSE a couple of weeks ago, they’re going to have to file bankruptcy, it looks like. Stuff like this is happening all over the place. Sure, we might not be in a textbook recession, but there’s nothing wrong at all with people being worried about the economy.

  2. I’m good with calling it an “economic downturn”.

    But like I said, if everyone perceives it is a bonafied recession, it doesn’t really matter whether or not the definition is met.

    I guess I’m more concerned with why people perveive it. Is it because of the media or because of their personal experience? I’ve been in a personal recession before when the economy itself was booming.

    Should we change the definition of recession to “when ‘they’ say we’re in a recession?”

  3. it is also defined as (wikipedia):

    “decline in a country’s real gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year”

    are the GDP numbers you are using real numbers? (i.e., inflation adjusted)? I typically go by this definition, and it doesn’t appear we are in a recession, however, it things don’t up-tick, we appear to be heading that way.

    i blame the MSM for hyping most of the news in this country, including the economy.

  4. BM, those numbers came from the BEA, so they should be the most accurate there are, but I doubt they are inflation adjusted. For instance, that doesn’t take into account what the average person pays extra for fuel each quarter.

    HM, that’s exactly what I’m saying. Starbucks barristas may actually be experiencing a recession because of you.

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