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If we hit a 3rd quarter in a row of contracting GDP, would you call it a recession?

dodobirdlord 4y ago
Maybe not even then? GDP dropping while employment, spending, and demand increase indicates an economic expansion coinciding with a decrease in labor productivity, which is extremely weird and not at all like a conventional recession where the economy contracts. Different terminology might be required. Additionally, with inflation at such a high level (9% or so), the last two quarter's real GDP growth estimates (-1.6% and -0.9%) are small percentages compared to the size of the error bars on the required inflation adjustment to compute the real GDP. Computing inflation is tricky and requires a lot of hand waving and boiling down different price changes across different sectors of the economy to get a single number, and if the calculation is off by even 1% (i.e. inflation is actually 8%), then the real GDP growth for last quarter would be positive at 0.1%. This is also happening at the same time that the US dollar is getting increasingly valuable vs most foreign currencies, so measured in terms of foreign currency value the US real GDP is still increasing, which just compounds the weirdness. Putting all of this together, I don't think the term "recession" is a good fit.
parkingrift 4y ago
I don't know. Are we still adding 370,000 jobs per month? What kind of GDP contraction are we talking about? 1%, 3%, 5%? Is the GDP contraction increasing or slowing from the prior quarters? If we went from -1.8% to -1.5% to -0.9% and we still had robust job growth I would probably say it's not a recession. But again, what does it even matter? Seems like people are only arguing about this to score political points. If you think we're in a recession, you might be right. If you think this is transitory, you might be right. If it weren't an election year we might not be having this conversation at all.
shard 4y ago
Looking at it another way: Q1 GDP contracted by 1.6%, Q2 by 0.9%. If Q3 contracts by 0.2%, should we call it a recession?

Maybe not even then? GDP dropping while employment, spending, and demand increase indicates an economic expansion coinciding with a decrease in labor productivity, which is extremely weird and not at all like a conventional recession where the economy contracts. Different terminology might be required. Additionally, with inflation at such a high level (9% or so), the last two quarter's real GDP growth estimates (-1.6% and -0.9%) are small percentages compared to the size of the error bars on the required inflation adjustment to compute the real GDP. Computing inflation is tricky and requires a lot of hand waving and boiling down different price changes across different sectors of the economy to get a single number, and if the calculation is off by even 1% (i.e. inflation is actually 8%), then the real GDP growth for last quarter would be positive at 0.1%. This is also happening at the same time that the US dollar is getting increasingly valuable vs most foreign currencies, so measured in terms of foreign currency value the US real GDP is still increasing, which just compounds the weirdness. Putting all of this together, I don't think the term "recession" is a good fit.

parkingrift 4y ago

I don't know. Are we still adding 370,000 jobs per month? What kind of GDP contraction are we talking about? 1%, 3%, 5%? Is the GDP contraction increasing or slowing from the prior quarters? If we went from -1.8% to -1.5% to -0.9% and we still had robust job growth I would probably say it's not a recession. But again, what does it even matter? Seems like people are only arguing about this to score political points. If you think we're in a recession, you might be right. If you think this is transitory, you might be right. If it weren't an election year we might not be having this conversation at all.

shard 4y ago

Looking at it another way: Q1 GDP contracted by 1.6%, Q2 by 0.9%. If Q3 contracts by 0.2%, should we call it a recession?