June 26, 2008
The “R” Word
During our recent High School Fed Challenge competition, students were frequently asked to state the definition of a recession. Their answer: “A recession is defined as two consecutive quarters of negative GDP growth.”
Is this correct? No! I know several economic textbooks use this definition, but the National Bureau of Economic Research (NBER) officially decides whether or not we are in a recession. The bureau’s Web site at NBER.com defines a recession as “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.”
Frequently these type of economic conditions coincide with two or more consecutive quarters of negative GDP growth, but not always. For example, the 2001 recession did not!
So…Are we in a recession?
By: Wade Rousse
Posted by Wade at June 26, 2008 9:41 PM
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Well, I'm hoping it is, because if not, then that would just make all these negative economic trends seem a lot more complicated. Like, and this may be as flawed a way to judge a recession as looking at the price of gas rising, but look at all the huge firms that have recently filed for bankruptcy. Zales, Linens and Things, Sharper Image, ATA, Village Inn. And the crazy thing is that none of the companies I just named are in the same industry. Granted three are retail companies...and so that might actually be an effect of the expansion of uses in the internet...but still. And who knows, maybe that's what part of this is. John Leavitt talks about the drop in the gap between what real estate agents sell their clients' houses, and what they sell their own houses for, and he likens it to the increase in consumer information due to the internet. I mean, essentially, the internet is pushing out the middle man, and that's a pretty big industry in America...so it's got to have some sort of effect on our economy, right? I guess I'm just rambling...but I just feel like to some degree, this "recession" is America's way of trimming the fat, and reorganizing itself to be more efficient in today's economy. Like pruning a plant...you take off the dying leaves, so that the plant can focus on strengthening the parts that are already strong. I don't know, that's my take on it.
Posted by: Michael Welton at July 3, 2008 3:52 PM
Michael brings up a great point regarding the situation of many business that have gone into bankruptcy. Efficiency increases the gains and benefit of all business yet efficiency isn't only found in the quantity and selling price but also in the maintaining capital and using all inputs appropriately with minimal cost. Recessions are the part of the business cycle that rewards those that have done the most efficient work in increasing their revenue with minimal cost and those that aren't efficient are dropped from the capitalist society where only the strongest survive.
Posted by: Jose Zamora at July 4, 2008 12:28 AM
yeah.. interesting :)
Posted by: Nero Telechargement Gratuit at November 10, 2009 2:13 AM
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