News What is wrong with the US economy?

[Jimmy Snyder]

As long as we are willing to rely on opinions and not facts we are in a recession of a non-economic sort.

 

[Jimmy Snyder]

He said his definition of a recession is when most people and businesses are not doing as well as they were three, six or nine months ago.

With all due respect Warren, most businesses fail. How can this possibly be your definition?

 

[Gokul43201]

We have had two consecutive quarters of negative income growth (per capita GDP). That is definitely an economic indicator of recession.

 

[Jimmy Snyder]

We have had two consecutive quarters of negative income growth (per capita GDP). That is definitely an economic indicator of recession.

This is not the definition of a recession. Don't give up hope though.

 

[Gokul43201]

This is not the definition of a recession. Don't give up hope though.

I didn't say it was. Was my font size too small?

 

[Jimmy Snyder]

I didn't say it was.

My bad. That's two votes against recession versus one for. You lose Warren.

 

[Astronuc]

This is not the definition of a recession. Don't give up hope though.

No one here is hoping for a recession. I believe we are in one, even if the GDP shows a slight +0.6% annual growth. It's still financed by borrowing. I certainly don't put my mortgage or charges on a credit card down as income, because I have to repay it.

With bankruptcies and foreclosures up, many areas with about a 10% drop in real estate value, more unemployment (although not reflected in the unemployment rate, because some folks are discouraged and no longer count as unemployed), reduced wages (I heard yesterday that GM, Ford, Chrysler have bought out employment contracts of older workers and hired on younger workers are reduced wages - but still need to verify that), more people looking for food assistance, . . . . then there's definitely something wrong with the economy.

It would be nice if the government used appropriate accounting methods such as those codified by FASB.

 

[Jimmy Snyder]

It's still financed by borrowing.

Growth in GDP has always been financed by borrowing. Don't give up hope though.

 

[turbo]

As long as we are willing to rely on opinions and not facts we are in a recession of a non-economic sort.

Are you willing to believe the president of the National Bureau of Economic Research? They are the group the are the official arbiter of recession.

"The economy is now in a recession," he said. "It will last longer and be deeper than the last two recessions, which lasted only 8 months from peak to trough. It could well be longer and deeper than the recession in the early 1980s that lasted 16 months."

http://www.boston.com/business/articles/2008/03/15/recession_is_here_economist_declares/

 

[Jimmy Snyder]

Are you willing to believe the president of the National Bureau of Economic Research? They are the group the are the official arbiter of recession.

He is not the Bureau, just the president of it. They are the official arbiter, not he. Don't give up hope though.

 

[Astronuc]

I think Feldstein indicated that the US is headed into a recession.

Meanwhile more great news on the economy

http://www.marketwatch.com/news/story/pilgrims-pride-2nd-quarter-loss/story.aspx?guid=%7B8A442A2B%2DDEFC%2D48B1%2D90D8%2DA3FB7EC55BEE%7D&dist=TQP_Mod_mktwN

Pilgrim's Pride Corp.'s fiscal second-quarter loss widened to $111.4 million, or $1.67 a share, from a loss of $40.1 million, or 60 cents a share, a year ago, due in part to record-high feed costs caused by what the company called the federal government's "deeply flawed" ethanol policy. Results for the latest quarter include a charge of 17 cents a share from shuttering a processing plant as well as six distribution centers. Analysts surveyed by Thomson Reuters expected a loss of 81 cents a share, on average. Analysts' estimates usually exclude unusual items.

UBS, the largest Swiss bank, said Tuesday that it expected to cut about 5,500 jobs, including 2,600 in its investment banking unit, as it announced a first-quarter loss of about $10.9 billion.

Morgan Stanley said on Monday that it intended to cut about 5 percent of its staff this year, mostly in the United States.

 

[turbo]

He is not the Bureau, just the president of it. They are the official arbiter, not he. Don't give up hope though.

Apparently you didn't read the article I linked, or you consider yourself much smarter than for than 70% of the country's economists. Your silly "hoping for a recession" games are wearing thin - nobody is hoping for economic ruin. Those of us who bother to watch housing, jobs, consumer prices, and other indicators are telling you that we are in recession and you refuse to acknowledge the truth. The article I linked was more than a month and a half old and leading economic indicators are still trending in bad directions ~50 days later.

From the linked article:

Feldstein's view is increasingly the common one among economists. A Wall Street Journal survey of economists published yesterday found more than 70 percent agreed that the US economy is now in recession.

 

[Jimmy Snyder]

So, the NBER is the final arbiter except that whoops, they haven't said we're in a recession, so now the Wall Street Journal survey is the final arbiter. I don't think so. Don't give up hope though.

 

[Jimmy Snyder]

Hopes that the US was in a recession were dealt a setback today. Martin Feldstein, a president of a final arbiter, in an interview today with Bloomberg Television, said that the US economy is 'sliding into a recession'. Now here is an economist who has been laid end to end in classic fashion. He did hold out some hope though:

It's really too early to tell.

 

[lisab]

So, the NBER is the final arbiter except that whoops, they haven't said we're in a recession, so now the Wall Street Journal survey is the final arbiter. I don't think so. Don't give up hope though.

You don't seem to want to hear what people are saying about not wanting the economy to get worse. I'm no fan of the Bushies and their policies, but I'm teetering on the edge of losing my job and let me tell you straight up: I don't want the economy to get worse.

But it seems you will to believe what you want to believe.

Meanwhile, a whooping 81% of Americans say the country is heading in the wrong direction and recession or not, that's what will inform their vote in November.

http://www.cnn.com/2008/US/04/04/dissatisfied.poll.ap/

 

[Jimmy Snyder]

You don't seem to want to hear what people are saying about not wanting the economy to get worse.

I'm sorry, I didn't read this carefully enough. I have no doubt that we all want the economy to get better. I would want that no matter what condition it was in. I am critical of those who say that we ARE in a recession. This has no basis in fact, only hope.

The economy did get better in the previous quarter, and in every quarter since 2001. We haven't had two bad quarters in a row since 1990. So if you say you want the economy to get better, what exactly do you mean.

 

[lisab]

I'm sorry, I didn't read this carefully enough. I have no doubt that we all want the economy to get better. I would want that no matter what condition it was in. I am critical of those who say that we ARE in a recession. This has no basis in fact, only hope.

The economy did get better in the previous quarter, and in every quarter since 2001. We haven't had two bad quarters in a row since 1990. So if you say you want the economy to get better, what exactly do you mean.

I work in the wood products industry. Our industry is very closely tied to the residential market. The number of housing starts will remain stagnant as long as prices of existing houses keep falling. The price of existing houses will fall as long as the credit market stays soft and the number of foreclosures remains high. Trouble is, I don't think we've hit bottom yet.

While it's true our industry is just one sector of a huge economy, it worries me that the troubles in our sector seem to be spilling into other sectors.

So for me, when I say I want the economy to get better, I mean I want the credit markets to firm up and the housing market to recover - the sooner the better.

The rising cost of fuel is troubling, too. A barrel of oil was $28 in November 2000. Now it's north of $110 - that's like an anchor on our economy, and it affects all sectors.

(You had me scratching my head with the Peter/Paul line! I was thinking, dang, I guess I should have gone to Sunday school...or is he referring to the folk singers...?)

 

[quadraphonics]

I am critical of those who say that we ARE in a recession. This has no basis in fact, only hope.

Honest people who know about this stuff will tell you that there is no precise, generally accepted definition of "recession," so it's silly to insist that we are, or are not, in a recession based on whether GDP is growing negligibly, or actually contracting. The employment picture is bad, the stock market is not doing well, inflation is up, consumer spending is off, per-capita GDP is shrinking, and even the razor-thin growth in total GDP is not expected to continue. Whether we call it a recession or a downturn or a rough patch or a gooseberry is irrelevant. A rose by any other name would still smell as sweet...

Also, the GDP stats are for the 4th quarter of 2007, which was just the beginning of the troubles. We won't have the relevant data for today until near the end of 2008, so you're actually arguing that we weren't in a recession last year, not that we aren't in one now.

The economy did get better in the previous quarter, and in every quarter since 2001. We haven't had two bad quarters in a row since 1990. So if you say you want the economy to get better, what exactly do you mean.

Well, some likely candidates would be: grow faster than the population, actually create jobs instead of shedding them, display decent growth in consumer spending, produce large stock returns... the total GDP is not the only, or even the most important, measure of economic performance.

 

[Gokul43201]

My bad. That's two votes against recession versus one for.

But I didn't "vote against recession" either. Maybe it's the background color?

 

[Jimmy Snyder]

But I didn't "vote against recession" either.

That's fair. You weren't saying that we're in a recession, and you weren't saying that we aren't in a recession. But its still not just me against Warren though. Martin Feldstein (turbo-1 cited him) agrees with me. So it's still two against one, Warren. I always like to tease Warren, he bought some Berkshire Hathaway shares off me for $20 when they weren't worth more than $17.50.

 

[drankin]

There is no doubt we are having a slow-down.

Is it realistic to expect the economy to always be strong? Or is this to be expected after things were doing very well for a time?

I liken it to one expecting summer to go on forever when they live in Seattle.

 

[turbo]

Jimmysnyder, you should post a link with a date that we can see. The last such "too soon to tell" quote I found from Feldstein was back in February, though he had been banging the drum about recession since December. The quote you attribute to him does not square with any of his recent pronouncements.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ag0t9NpkLkz0&refer=home
http://www.cnbc.com/id/23629967/
http://www.reuters.com/article/ousiv/idUSN0747602120080407
http://whereistand.com/MartinFeldstein/35431
http://www.econbrowser.com/archives/2008/03/harvards_feldst.html
http://www.marketwatch.com/news/sto...C443E-ED52-4FE8-AF22-52F72BEB5491}&siteid=rss
http://www.marketwatch.com/news/sto...spx?guid=F2810192-6035-43B6-8495-B331E7E1005F

 

[russ_watters]

The employment picture is bad

Define "bad". At 5.0%, it is relatively low, historically.

...the stock market is not doing well...

Define "not doing well". The Dow is down about 2% for the year, but it bottomed-out the first week in March and is up 11% over the past two months. In fact, this would imply that the worst of this whateveryouwanttocallit may already be behind us.

Whether we call it a recession or a downturn or a rough patch or a gooseberry is irrelevant. A rose by any other name would still smell as sweet...

In this particular case, the terminology carries both a real meaning and an emotional connotation and therefore I think the question ("are we in a recession?") is a very important one - especially in an election year. If you remember, the question was the source of much political argument when we last were in a recession because it wasn't clear if we were in one or when exactly it started. For political purposes, pushing it forward or back a quarter or two would make it Bush's 2001 recession or Clinton's 2000 recession.

But ok, if you'd rather not worry about labels, we can at least say this: as whateveryouwanttocallits go, this whateveryouwanttocallit is about as mild as whateveryouwanttocallits ever get, which is a testament to the underlying strength of the economy and bodes well for the prospects for recovery from the current whateveryouwanttocallit.

 

[turbo]

I work in the wood products industry. Our industry is very closely tied to the residential market. The number of housing starts will remain stagnant as long as prices of existing houses keep falling. The price of existing houses will fall as long as the credit market stays soft and the number of foreclosures remains high. Trouble is, I don't think we've hit bottom yet.

While it's true our industry is just one sector of a huge economy, it worries me that the troubles in our sector seem to be spilling into other sectors.

Sorry to hear that, lisab. Wood products and pulp and paper are a huge part of Maine's economy, and the steep decline of those industries is hurting vehicle sales, retail sales, service industries and more. The lack of productivity in logging, trucking, sawmills, etc is also driving down tax revenue, putting more pressure on local government. One large local sawmill is still operating at a loss and stockpiling inventory to avoid the loss of skilled employees. I hope your employer can weather the down-turn.

 

[mheslep]

Larry Beinhart sums things up pretty well:
http://www.huffingtonpost.com/larry-beinhart/bush-bu****-boom-and-bust_b_100157.html

Yes why trust Commerce when you have Beinhart who

...was a Raymond Chandler Fulbright Fellow in Detective and Crime Fiction Writing at Wadham College. An avid skier and sometime instructor at Hunter Mountain in New York State...

 

[turbo]

Yes why trust Commerce when you have Beinhart who

Well, it's obvious that he must be wrong, then, and the recession nay-sayers must be right. Ad hominem attacks on the message-bearer prove nothing.

 

[Jimmy Snyder]

Jimmysnyder, you should post a link with a date that we can see.

I can't. It was in a television interview on Bloomberg TV. I assume that eventually someone will report on it and then I will be able to link to it.

 

[quadraphonics]

Define "bad". At 5.0%, it is relatively low, historically.

That's up from 4.5% one year ago. We've lost more than 1/4 million jobs so far in 2008. There are almost 1 million more unemployed workers today than there were one year ago. On top of that, almost one million more people are working part-time for economic reasons than there were a year ago.

http://www.bls.gov/news.release/empsit.nr0.htm

So while, no, the unemployment rate hasn't yet reached crisis levels, that doesn't mean that the jobs picture isn't bad. A good jobs picture would be an economy that is *creating* jobs, not one that is dumping them by the hundreds of thousands.

Define "not doing well". The Dow is down about 2% for the year, but it bottomed-out the first week in March and is up 11% over the past two months.

The Dow is down almost 4% compared to 1 year ago. When the stock market is doing well, it tends to show significant increases over the course of a year. My own personal definition of "not doing well" is when my 401k is growing more slowly than inflation, which it was doing until very recently.

In fact, this would imply that the worst of this whateveryouwanttocallit may already be behind us.

Possibly, yes. Or, more correctly, that the damage has already been priced into the stocks.

In this particular case, the terminology carries both a real meaning and an emotional connotation and therefore I think the question ("are we in a recession?") is a very important one - especially in an election year. If you remember, the question was the source of much political argument when we last were in a recession because it wasn't clear if we were in one or when exactly it started. For political purposes, pushing it forward or back a quarter or two would make it Bush's 2001 recession or Clinton's 2000 recession.

I think you're overstating the importance of the labels. The last time I recall a recession actually affecting a political outcome was in 1992, and what did it was the economic fact of the recession, not the label itself. People are motivated by their pocketbooks, not the labels that pundits apply. Refusing to label the current downturn a recession is not going to make Hillary Clinton's populist posturing any less effective with the Rust Belt crowd. All it will accomplish is to convince said voters that you are out of touch with their lives. I guess what I'm saying is that popular confidence (or lack thereof) in economic prospects is largely a grassroots phenomenon, driven by the actual on-the-ground performance of the economy. Playing word games with statistics can have a short-lived, marginal effect, but it's not going to change any fundamentals.

For that matter, popular disenchantment with the economy is fueled more by the fact that the previous recovery didn't see any rise in real wages than it by the current troubles. People are far less accepting of the bust side of the business cycle when they lack confidence that they'll benefit significantly from the ensuing boom.

But ok, if you'd rather not worry about labels, we can at least say this: as whateveryouwanttocallits go, this whateveryouwanttocallit is about as mild as whateveryouwanttocallits ever get, which is a testament to the underlying strength of the economy and bodes well for the prospects for recovery from the current whateveryouwanttocallit.

Okay. Is there anyone serious who thought that we wouldn't recover? This kind of thing happens every 5-10 years or so. You seem to be arguing against some kind of hypothetical pessimist/doomsayer position that I don't see represented here.

 

[Jimmy Snyder]

when I say I want the economy to get better, I mean I want the credit markets to firm up and the housing market to recover - the sooner the better.

Should we take resources away from other parts of the economy to firm up the credit markets and the housing market? Is the economy resilient enough to withstand such meddling? Is it also very fragile?

 

[mheslep]

you seem to be arguing against some kind of hypothetical pessimist/doomsayer position that I don't see represented here.

Seems amply represented to me.