Tuesday, January 29, 2008

Is U.S. in Recession?

The Wall Street Journal has an interesting blog post up discussing this question:

"Stanford economist Robert Hall, chairman of the National Bureau of Economic Research committee that dates recessions, is far from announcing whether such an event has started. But he and his colleagues on the NBER’s Business Cycle Dating Committee have taken a key step: The usually dormant panel has started discussing the economic data."

They also have the National Bureau of Economic Research definition of a recession:
“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.”

It is sort of amazing that the US is so accustomed to "constant growth" that a simple recession could be causing so much anxiety not only in the US but across the globe. I say simple recession here because it is not even confirmed we are in one, although most economists of all stripes are now agreeing we are heading towards one. The argument now is going to be how deep and long this coming recession lasts - but - again - I am still shocked at just how much a panic there seems to from the mere word. Recessions happen in capitalist societies/economies - they are normal and probably healthy. I think the real fear here is that people know or feel (even if they are not saying so) that there may be a realignment of the US economy to what I call a more mature economy - that is - an economy of slower growth and demand overall. With the ever rising price of energy costs and the end of cheap credit to American consumers (due to not only the crashing housing market but to tighter credit world wide), maybe the American economy in the next several years will look a lot more like the economies of the EU - and I don't think that would be such a bad thing.