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Yes, the U.S. economy is likely in recession

122 points by zinekeller 4y ago

acheron 4y ago
Sounds like dangerous misinformation to me. I expect everyone involved to be banned from Facebook, Twitter, Reddit, and Google as soon as possible.
homeland221 4y ago
Many companies retrench/layoff. Margins are zero and that is consider good. Many going negative and have to do creative financial engineering to eke out some profits. I guess we just have to wait something big collapse come this Nov in the same way as 2008. By the way, winter is coming. Not sure how green EU can be keeping those coal plants running under capacity.
zinekeller 4y ago
10-foot ladder: http://archive.today/2022.08.03-132452/https://www.japantimes.co.jp/opinion/2022/08/02/commentary/world-commentary/u-s-economy-recession-forecast/ http://archive.today/2022.08.03-132452/https://www.japantime... Originally published here, but is heavily paywalled: https://www.project-syndicate.org/commentary/two-consecutive-quarters-negative-us-growth-predict-recession-since-1948-by-robert-j-barro-2022-07 https://www.project-syndicate.org/commentary/two-consecutive...
matt321 4y ago
We don't need to change the definition of recession. We can just blame the last guy like we have always done for every politician on both sides.
- matthewdgreen 4y ago
  Or more accurately: we should blame the global pandemic and subsequent economic insanity, which isn't "the other guy" and also probably explains it better than anything else.
m00dy 4y ago
refurb 4y ago
Exactly, it's "likely" but we won't know for sure under NBER makes the call. Of course that will likely be in hindsight, and well past the next election, but hey, you can't rush these things. I'm eager awaiting the next Tweet that include #trust_the_economists
- edmcnulty101 4y ago
  > I'm eager awaiting the next Tweet that include #trust_the_economists That's funny.
- mc32 4y ago
  With Krugman leading this august group, no doubt.
  - generj 4y ago
    The list of members of the NBER Business Cycle Dating Committee is publicly available. The chair has been on the committee since 1978, so even if Krugman joined he would not be the leader (and frankly the board would be insane to follow him rather than Christina Romer even if the older members dropped out). Please avoid creating easily debunked conspiracy theories.
    - mc32 4y ago
      I was riffing on Krugman's notoriously low prediction rate --not being serious.
      - mikeyouse 4y ago
        I'm sure you'd understand why that falls especially flat in the comments of an article written by Robert Barro of all people?
scottLobster 4y ago
The current go-to arguments for not being in a recession are low unemployment and high inflation, however those have historically been lagging indicators that start moving somewhere in the middle of a recession. So I'd say if we're not in a recession right now, we're on the edge of one. There have been so many economic shocks all at once I don't see how we pull out into positive growth without some serious retooling, and it'll take a recession to provide the necessary motivation/political cover to kickstart said retooling.
- dereg 4y ago
  For me, the argument about the technicalities of what makes a recession bothers me much, much less than the smugness of a general group of the intelligentsia who once conveniently anointed themselves "fact-checkers" that are trying to handwave away the idea of a recession in spite of historical definitions that we've never strayed away from. We really ought to resist bulls*t like this. One can simultaneously believe that people should get vaccinated, that Trump is an embarrassment of a person and leader, that news has stopped being news for at least 15 years, and that the "but actually it's not a recession because.." elite of this country don't care about truth but, instead, power.
- mywittyname 4y ago
  GDP is also a lagging indicator. Recessions happen fast. There's never been any "I think" in all the recessions I've experienced. Everyone knew.
  - hammock 4y ago
    If you are young and thinking only of 2001, 2008 and 2020, those were crashes and significantly bigger than previous recessions. See another commenter’s chart here: https://fred.stlouisfed.org/series/GDPC1 https://fred.stlouisfed.org/series/GDPC1
    - dragonwriter 4y ago
      2001 was a short and mild recession (and was widely debated up until shortly after 9/11, and then often blamed on 9/11 even though it started six months earlier.) It felt worse and later because lots of people suffered from the poor distributional features of the following expansion more than the recession itself.
tablespoon 4y ago
No, it's obvious we're not in a recession. The fact that an election is coming up totally disproves the idea to any sane person whose beliefs are grounded in reality.
- paulryanrogers 4y ago
  Guessing this is sarcasm, yet it's not clear to me what the joke is. That the ruling party will always deny there's a recession near an election?
  - TeeMassive 4y ago
    Bill Clinton didn't
  - scottLobster 4y ago
    Pretty much. See also Republicans blaming Biden for every gas price increase and Democrats taking credit for every price decrease, whether they had anything to do with it or not. Typically an administration that's in charge during a recession doesn't do well in elections, so they deny it as long as possible.
  - tablespoon 4y ago
    It's more about how political affiliation defines "objective reality."
mormegil 4y ago
A different view of basically the same topic by Noah Smith: https://noahpinion.substack.com/p/yes-were-probably-in-a-recession https://noahpinion.substack.com/p/yes-were-probably-in-a-rec...
TeeMassive 4y ago
I don't mind changing a definition for a better one. But the WH did not do this. They just unilaterally claimed that "this two quarters of negative growth is not the definition" to shut all other questions about the economy slowing down.
- zmgsabst 4y ago
  Their strategy worked for COVID[1], why wouldn’t they keep doing it? [1] — denying inconvenient facts, redefining terms, and using social media to censor/propagandize. Now Facebook is “fact checking” economists. https://www.foxnews.com/media/economist-slams-facebook-absolutely-orwellian-fact-check-upholding-bidens-recession-denial https://www.foxnews.com/media/economist-slams-facebook-absol...
- scrlk 4y ago
  >"In the end, the Party would announce that two and two made five, and you would have to believe it. It was inevitable that they should make that claim sooner or later: the logic of their position demanded it. Not merely the validity of experience, but the very existence of external reality, was tacitly denied by their philosophy. The heresy of heresies was common sense. And what was terrifying was not that they would kill you for thinking otherwise, but that they might be right. For, after all, how do we know that two and two make four? Or that the force of gravity works? Or that the past is unchangeable? If both the past and the external world exist only in the mind, and if the mind itself is controllable—what then?" - Nineteen Eighty-Four
- generj 4y ago
  Except that’s never been the definition. For decades the definition has always been “whatever NBER says.” Two quarters of negative growth is a convenient shorthand because NBER takes their time declaring a recession, and it is generally true Several recent recessions don’t match the two quarters of negative growth rule.
  - TeeMassive 4y ago
    > Except that’s never been the definition. That's not true. Economists have given definitions and the one considered the de facto standard was two quarters of negative growth, which was a very good predictor of recessions in our lifetime: https://corporatefinanceinstitute.com/resources/knowledge/economics/recession/ https://corporatefinanceinstitute.com/resources/knowledge/ec... > Recession is a term used to signify a slowdown in general economic activity. In macroeconomics, recessions are officially recognized after two consecutive quarters of negative GDP growth rates. In the U.S., they are declared by a committee of experts at the National Bureau of Economic Research (NBER). https://www.forbes.com/advisor/investing/what-is-a-recession/ https://www.forbes.com/advisor/investing/what-is-a-recession... > In 1974, economist Julius Shiskin came up with a few rules of thumb to define a recession: The most popular was two consecutive quarters of declining GDP. A healthy economy expands over time, so two quarters in a row of contracting output suggests there are serious underlying problems, according to Shiskin. This definition of a recession became a common standard over the years. > For decades the definition has always been “whatever NBER says.” They actually have their own definition, but it's more lose and more inclusive: https://www.forbes.com/advisor/investing/what-is-a-recession/ https://www.forbes.com/advisor/investing/what-is-a-recession... > NBER has its own definition of what constitutes a recession, namely “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.” And from the NBER itself: https://www.nber.org/business-cycle-dating-procedure-frequently-asked-questions https://www.nber.org/business-cycle-dating-procedure-frequen... > Most of the recessions identified by our procedures do consist of two or more consecutive quarters of declining real GDP, but not all of them. In 2001, for example, the recession did not include two consecutive quarters of decline in real GDP. In the recession from the peak in December 2007 to the trough in June 2009, real GDP declined in the first, third, and fourth quarters of 2008 and in the first and second quarters of 2009. Real GDI declined for the final three quarters of 2001 and for five of the six quarters in the 2007–2009 recession. This is where the WH's manipulation comes in. They say it's not the actual definition, but what they don't say is that the other definitions are more likely to identify 2022 as the beginning of a recession. > Several recent recessions don’t match the two quarters of negative growth rule. How many times there was two or more quarters of negative growth that wasn't a recession?
Invictus0 4y ago
The market peaked at 480, it's at 410 now and rising. 410 seems like a fair price to me--some silly tech valuations got wiped out but many companies are still forecasting strong demand in H2. It's certainly not the cataclysm many people were expecting a few months ago.
- zmgsabst 4y ago
  That’s a 14% drop. Do we have a reason to believe this is a recovery versus a “dead cat bounce” caused by market irrationality and hope? - - - - - As an aside, you should list specifically what index you’re referencing as “the market”, so other people can check the numbers themselves.
  - Invictus0 4y ago
    Suppose we could determine the "true" value of every company in the market. If the price at peak was greater than the true value, and the price now is the true value, then do you still call it a "recovery?" When you account for inflation, the price of stocks hasn't gone up all that much since 2020. I think most casual observers forget this analysis.
  - rightbyte 4y ago
    Counting in inflation the drop is probably around 24%(?) in real value.
helen___keller 4y ago
The “recession debate” has to be the most stupid thing to come this election cycle. I guess I’ll take it over “her emails” and “his latest tweet”
- nyokodo 4y ago
  > I guess I’ll take it over “her emails” and “his latest tweet” It’s not as cringe inducing but considerably worse in other respects. Wikipedia didn’t take sides in the definition of email or tweeting to benefit one party in those previous elections.
  - lalaland1125 4y ago
    Did you look at the Wikipedia edit logs yourself or is that an impression you got secondhand from a partisan news source? If you look at the logs it's pretty clear that Wikipedia didn't take sides here.
- albatross13 4y ago
  - helen___keller 4y ago
    You’re entitled to your opinion but personally having it as a spotlight issue for months seemed like an utter waste of air to me
    - mikeyouse 4y ago
      Especially with 1/100th the time and energy spent on most of the next administration using personal email / signal / other self-deleting apps to run the government. Utterly bizarre how "her emails" dominated the coverage for a cycle.
    - hatware 4y ago
      It's only a waste of air if you don't understand the security implications.
pavlov 4y ago
The United States of America has become a place where 60% of people are actively rooting for their country to do worse whenever their guy is not in charge. (40% of people are too busy making ends meet to even think about voting, or whether they identify with tribe A or B.) You can't really build anything with that kind of attitude. A democracy can't work if you start imagining half your compatriots are enemies, and you'd rather blow up the entire place than let them decide anything.
- leereeves 4y ago
  There's a difference between rooting for the country to do worse and acknowledging that it is doing worse, and we shouldn't shy away from the latter out of frustration with the former. And real wages fell 3% in six months [1] (i.e. over the first half of this year, wages fell at a 6% annual rate), so I think it's time to acknowledge that the nation is doing worse, at least for the working class. 1: https://www.statista.com/statistics/216259/monthly-real-average-hourly-earnings-for-all-employees-in-the-us/ https://www.statista.com/statistics/216259/monthly-real-aver...
- albatross13 4y ago
  Amen. Now we just need to take the next logical step into balkanization and we can start making real progress. I have no right voting for federal candidates in my midwest region that can influence legislation that impacts new york, and vice versa. Regionality > Nationality tl;dr america is geographically too big and it's really starting to show.
  - pfisch 4y ago
    This would result in worse economic conditions for everyone. Just look at brexit.
    - albatross13 4y ago
      Fine by me- my state grows its own food (both meat and vegetables), exports plenty, and is sparsely populated. I reckon we'd be fine. True to the OP's point: I don't really care what happens to the east/west coasts. These people have been trying to legislate my rights away for decades now, so I am very apathetic to their plights.
Lendal 4y ago
We have an oil-based economy. It is impossible to raise the price of gas & diesel for an extended period of time without triggering a recession. I don't know why we focus so much on interest rates and politicians when it's oil prices that actually have much more of an effect on the economy, not interest rates, political slogans, or anything else.
- ch4s3 4y ago
  > I don't know why we focus so much on interest rates It directly effects the supply of money which is a direct lever on the economy.
- fennecfoxen 4y ago
  We have a money-based economy. Not in the same sense as oil-based, but a lot of economic activity takes place because someone borrows money, uses it to buy something big, and then repays the lender over time. This is true of homes and renovations. This is true of college degrees. This is true of many automobiles and major appliances. This is true of major government infrastructure projects. This is not directly true of factories and shipping companies and and startups, but even these compete for their funding with everything else that seeks funding. The price of money up front is a big deal.
- throwaway894345 4y ago
  Inflation predated the oil crunch, but certainly the oil crunch exacerbated the problem. In general, economists probably understand the economy better than we do, so it's probably foolish to write them off in favor of some simplistic understanding of the economy.
eatonphil 4y ago
This is published on a Japanese newspaper but it was written by a Harvard prof: > Robert J. Barro, professor of economics at Harvard University, is a visiting scholar at the American Enterprise Institute and a research associate at the National Bureau of Economic Research [NBER]. What's kind of weird is that he points out that NBER (the group that, turns out, he works at) needs to be the one to officially "pronounce" it a recession. So he went public to say this despite the public group he works for not (yet) agreeing? Is he saying this in an official capacity as an NBER research associate or this is just his unrelated personal opinion?
- deleted 4y ago
  [deleted]
- zinekeller 4y ago
  This is very likely his personal opinion from the looks of it.
  - lern_too_spel 4y ago
    He's writing in his capacity as a member of the AEI, a conservative think-tank.
- s1artibartfast 4y ago
  I think is just providing some basic information and providing his opinion. For example, he clarifies that the NBER waits on average 7 months to declare a recession,and is essentially a retrospective assessment. However, it has never failed to declare a recession after two quarters GDP loss since WWII
thepasswordis 4y ago
I don't understand the debate around this. If the proverbial groundhog sees its shadow and Joe Biden agrees that we're in a recession, and then the press wing of the party starts agreeing that we're in a recession: who cares? Won't they just say it was the previous administrations fault anyway, and that we need to do things like pass the "inflation reduction act" to stop it?
- scottLobster 4y ago
  You think political/economic debates always have to be productive? :) Yeah it's a rather academic point. I guess some people like to actively rotate their portfolios as if their concerns about recession aren't already priced in. Otherwise you can make broad assumptions about what kind of job opportunities may exist over the next two years, how your company might do in a recession, etc and position yourself a little better. Perhaps it's not the right time to go for a risky consumer-facing startup, stuff like that. For my part seeing all the supply shocks, and the fact that the Fed might pivot to combat a serious recession, caused me to a sign a two year lease to lock-in a lower rate, as I believe we're not done with inflation yet.
  - thepasswordis 4y ago
    But none of that should be related to the presidents current opinion.
    - s1artibartfast 4y ago
      It does have an impact on tax and budget policy - something the president is directly involved in. If deficit spending is driving up the cost of living for most Americans, is now a good time to do it. If Most Americans are having more trouble paying their bills, should we increase government spending.
- matwood 4y ago
  > Won't they just say it was the previous administrations fault anyway Given the timescale for large economic changes (excluding something like a covid shock), it's almost always the prior admins fault - both good and bad.
rel2thr 4y ago
I think we are in a recession but it’s not that bad Earnings from google and other profitable tech companies have been really good There are some layoffs but really only in companies that over hired This is a very mild downturn , not doomsday
adamredwoods 4y ago
I personally don't think we should be so beholden to the GDP as the ultimate indicator for the health of any nation. It should be one of many. NBER states it is 'declined economic activity' leaving the door open for interpretation by many economists. https://www.nber.org/research/business-cycle-dating https://www.nber.org/research/business-cycle-dating BEA (as referenced from the article): https://www.bea.gov/news/blog/2022-07-28/gross-domestic-product-second-quarter-2022 https://www.bea.gov/news/blog/2022-07-28/gross-domestic-prod... FRED chart, to give perspective that the real GDP dip is very slight: https://fred.stlouisfed.org/series/GDPC1 https://fred.stlouisfed.org/series/GDPC1
- zinekeller 4y ago
  > FRED chart, to give perspective that the real GDP dip is very slight Looking at it, except for 2008 it seems that the dip is mild (for example the 1970's oil crisis have a very mild slope).
  - s1artibartfast 4y ago
    The dip looks larger than every recession since 1950 with the exception of 2008 and 2019
coldtea 4y ago
Can't be, since me and my 10% friends haven't been affected /s
- rufus_foreman 4y ago
  That's the traditional definition. When your friends get laid off, it's a recession. When you get laid off, it's a depression.
deleted 4y ago
[deleted]
rob74 4y ago
Politics aside, as a non-native speaker this makes me think of the word "likely". If you use it, just how likely is the event that you apply it to? Is it equivalent to "probably", or to "possibly"? In German we have "wahrscheinlich", which is the same as "probably" (and "Wahrscheinlichkeit", "probability" and "likelihood" are synonyms), so that would mean "likely" is the same as "probably"?
- ajkjk 4y ago
  In this title I feel like the word "likely" is a bit inappropriate and "probably" would make more sense. "Likely" implies a bit more.. probabilistic reasoning, whereas gauging a recession is more a question of how you define it. But here, I guess, it's just being used as a slightly more professional way to say "probably", and should be taken to mean exactly the same thing in this case.
- jack_squat 4y ago
  If something is "likely", I would assume it's more likely than not.
- guitarbill 4y ago
  There is another possibility: stating something as a fact could have legal implications (especially if it isn't "true"), but stating an opinion is often fine. So, I would read this as "Our opinion is the U.S. economy is in a recession (not a fact)", despite the article trying to convince you. It even finishes off with > "we can be highly confident that the U.S. economy entered a recession early in 2022." which is stronger than "likely", but still shy of saying that it is so.
- xanaxagoras 4y ago
  Yes, this usage is basically "wahrscheinlich". Here it is a rhetorical device to soften the author's conclusion: > The bottom line is that, with the announcement on July 28 of a two-quarter GDP decline, we can be highly confident that the U.S. economy entered a recession early in 2022. This will usually be the case. When something is likely X it is probably X, not possibly X.
dia80 4y ago
Define recession?
- fennecfoxen 4y ago
  “a significant episode during which economic output falls”
s1artibartfast 4y ago
I fundamentally don't understand how low unemployment is a counterclaim against economic recession. This is like saying sure you can't buy as much bread, but at least you are working longer. The fact that more people are working to produce less than before describes an economy in decline. Working more or longer isn't a good thing in its own right. In fact, it is bad it you are working more for less purchasing power. Employment growth has historically been associated with increased purchasing power, but the current situation is a deviation from this norm. Talking about employment growth ignoring this fact is a bit of a bait and switch playing on this incorrect association.
- 37 4y ago
  Exactly this, hit the nail on the head. If anyone thinks this isn't all happening because US mid-terms are coming up, they are delusional or lying to themselves.
- vouwfietsman 4y ago
  Forgive my ignorance here, but isn't it simply better for the economy to have low rather than high unemployment? And since a recession is basically "the economy is doing bad" doesn't that mean that the unemployment argument is: "it may be doing bad, but not /that/ bad". And then the discussion is if the economy is doing bad enough to call it a recession, people point to low unemployment and say: no.
  - s1artibartfast 4y ago
    There is a lot going on in this question, so I apologize if my answer doesn't address. It really comes down to what you mean by "better for the economy". When most people care about the economy, what they really care about is how much "stuff" they or the average person can buy. To one extreme, many people would still be unhappy if the GDP and "economy" doubled, but only 10% of people were working. Either 90% of people would be going without, or they would be on some sort of welfare taxed from the 10%. To the other extreme, many people would be unhappy if there were 100% employment, but all you could buy with it is a loaf of bread. The ideal is to have high labor demand (usually associated with high employment) and growing GDP. This means that people who want to work can easily get a job, and the amount of "stuff" they can get from working keeps going up.
D_Alex 4y ago
This would be the first recession ever featuring near-record-low unemployment. if anyone has any insights on how we are having an economic contraction AND such low unemployment, I'd love to hear them.
- Fauntleroy 4y ago
  Way higher capacity for underemployment with the "gig economy", which was less prevalent in previous recessions.
  - D_Alex 4y ago
    OK this is a plausible explanation.
- markburns 4y ago
  Low wages, high inflation, general financialization of everything resulting in more people working or working multiple jobs to keep their heads above water. Much less expendable income means economic contraction.
  - D_Alex 4y ago
    >more people working or working multiple jobs This should cause the opposite of a recession, no? More people working --> more GDP, right?
    - markburns 4y ago
      Just working more to afford necessities isn't the same thing as putting money back into the economy. Less disposable income across society means lower economic activity.
- kk6mrp 4y ago
  Stagflation?
  - 4y ago
AlwaysRock 4y ago
What a mess this comments section is. Something to keep in mind is that many of the folks who read hn are in tech. You're less likely to feel the immediate effects of a recession (job loss, inflation) than folks who are in other, lower demand and job security, fields. It doesnt FEEL like a recession to me but neither did 2008. That was a problem other people were having.
- koheripbal 4y ago
  Recession has always had a very specific and widely accepted definition in the financial academia - referenced in literally hundreds of academic papers. In my 25 years in finance, I've never even heard anyone debate the definition of recession. Even today, in finance and despite all the Twitter drama, no one I know in the field debates that we're in a recession. The only debate is on social media with some spillover into low quality media. I listen to the experts when it comes to climate change, vaccines, evolution, the curvature of the Earth... but somehow when it comes to finance, no one on social media wants to listen to the experts in the field. Nobel prizes, lifetimes of academia, respected leaders in the field - they all must be liars because some Twitter personality and a Wikipedia mob tell me different. We need better reputation systems.
silent_cal 4y ago
The "uniparty" at work. Am I really supposed to believe that the NBER is non-partisan? If Trump were still president every news outlet would be screaming recession by now, and if you denied it you'd be ridiculed for "disagreeing with experts". We are completely surrounded by political propagandists disguised as impartial institutions. Dislike Trump all you want, but you can still call a spade a spade.
- knewter 4y ago
  If you denied it you'd have a banner in your post explaining that there is in fact a recession, and you'd be stripped of your ability to speak with your friends on {{ .platform }} until you removed your opinion.
bryanlarsen 4y ago
IMO, both sides of this debate are right. They're both saying subtly different things. True statements: - We are likely in a recession - We do not yet have numbers proving we are in a recession - We have some numbers that show we're in a recession - We have some numbers that show the recession didn't start in Q1 - If the numbers from Q3 are similar to the numbers in Q2 we will be in a recession by almost any definition False statements, which neither side are saying: - We have numbers proving we're in a recession - We're not in a recession
zackmorris 4y ago
I had an insight last night about inflation, and why it's not what we're experiencing today. Prices on convenience and entertainment have roughly doubled since the pandemic where I live. A cocktail was $7 in 2019, today it's more like $13. Milk at the gas station was as low as $3.50 but is now $5. Food delivery charges are ridiculous and unsustainable, but hey at least the services exist. High prices open the door to competition. Anyone can mix a cocktail for less than $13. Anyone can come up with a better way to deliver food or start a food truck. So the price gouging "inflation" we see today from corporations and established businesses leaves them vulnerable. If the economy really tanks and commercial real estate becomes worthless as projected, there's going to be so much entrepreneurship, just like in the early 2010s after the Housing Bubble popped. Not only that, but people are hyper-aware of stuff like rent seeking now, so may even buy out their landlords, form co-ops, avoid having an employer or standard work hours, basically do all of the things that should have probably happened 20 years ago after the Dot Bomb. But we got distracted by the War on Terror, which is transitioning to the War on Authoritarianism as people wake up. If Wall Street tanks, that will be better for Main Street. Having spent my entire adult working life barely surviving, I just don't care if established players go bust. This is a B.S. economy where maybe 3-10% of the population does any real work (like growing food) and everyone else takes whatever menial service job they can get or skims money off their employees. It's a joke. Anyone could do a better job managing the economy if we would ever do the most obvious things like tax the rich.
- rrrrrrrrrrrryan 4y ago
  > If the economy really tanks and commercial real estate becomes worthless as projected, there's going to be so much entrepreneurship Entrepreneurship always ramps up during the hard times. People lose their jobs and are forced to get scrappy. > High prices open the door to competition. Anyone can mix a cocktail for less than $13. Consumers became desensitized to price increases during the pandemic supply shortages. Right now, there's strong evidence to suggest that many businesses are simply raising prices because they can get away with it. If you're running a business, you have a once in a lifetime opportunity to jack up prices without harming your brand - you can just shrug and blame the abstract specter of "inflation" and your customer base directs their frustration toward some political entity instead of you. In the short-term it's a no-brainer; especially when everyone around you is doing it. But in the medium-to-long-term, you're 100% correct that it leave you vulnerable to being undercut by new entrants to the market.

122 points by zinekeller 4y ago

Sounds like dangerous misinformation to me. I expect everyone involved to be banned from Facebook, Twitter, Reddit, and Google as soon as possible.

homeland221 4y ago

Many companies retrench/layoff. Margins are zero and that is consider good. Many going negative and have to do creative financial engineering to eke out some profits. I guess we just have to wait something big collapse come this Nov in the same way as 2008. By the way, winter is coming. Not sure how green EU can be keeping those coal plants running under capacity.

zinekeller 4y ago

10-foot ladder: http://archive.today/2022.08.03-132452/https://www.japantimes.co.jp/opinion/2022/08/02/commentary/world-commentary/u-s-economy-recession-forecast/ http://archive.today/2022.08.03-132452/https://www.japantime... Originally published here, but is heavily paywalled: https://www.project-syndicate.org/commentary/two-consecutive-quarters-negative-us-growth-predict-recession-since-1948-by-robert-j-barro-2022-07 https://www.project-syndicate.org/commentary/two-consecutive...

matt321 4y ago

We don't need to change the definition of recession. We can just blame the last guy like we have always done for every politician on both sides.

matthewdgreen 4y ago
Or more accurately: we should blame the global pandemic and subsequent economic insanity, which isn't "the other guy" and also probably explains it better than anything else.

m00dy 4y ago

refurb 4y ago

Exactly, it's "likely" but we won't know for sure under NBER makes the call. Of course that will likely be in hindsight, and well past the next election, but hey, you can't rush these things. I'm eager awaiting the next Tweet that include #trust_the_economists

edmcnulty101 4y ago
> I'm eager awaiting the next Tweet that include #trust_the_economists That's funny.
mc32 4y ago
With Krugman leading this august group, no doubt.
- generj 4y ago
  The list of members of the NBER Business Cycle Dating Committee is publicly available. The chair has been on the committee since 1978, so even if Krugman joined he would not be the leader (and frankly the board would be insane to follow him rather than Christina Romer even if the older members dropped out). Please avoid creating easily debunked conspiracy theories.
  - mc32 4y ago
    I was riffing on Krugman's notoriously low prediction rate --not being serious.
    - mikeyouse 4y ago
      I'm sure you'd understand why that falls especially flat in the comments of an article written by Robert Barro of all people?

scottLobster 4y ago

The current go-to arguments for not being in a recession are low unemployment and high inflation, however those have historically been lagging indicators that start moving somewhere in the middle of a recession. So I'd say if we're not in a recession right now, we're on the edge of one. There have been so many economic shocks all at once I don't see how we pull out into positive growth without some serious retooling, and it'll take a recession to provide the necessary motivation/political cover to kickstart said retooling.

dereg 4y ago
For me, the argument about the technicalities of what makes a recession bothers me much, much less than the smugness of a general group of the intelligentsia who once conveniently anointed themselves "fact-checkers" that are trying to handwave away the idea of a recession in spite of historical definitions that we've never strayed away from. We really ought to resist bulls*t like this. One can simultaneously believe that people should get vaccinated, that Trump is an embarrassment of a person and leader, that news has stopped being news for at least 15 years, and that the "but actually it's not a recession because.." elite of this country don't care about truth but, instead, power.
mywittyname 4y ago
GDP is also a lagging indicator. Recessions happen fast. There's never been any "I think" in all the recessions I've experienced. Everyone knew.
- hammock 4y ago
  If you are young and thinking only of 2001, 2008 and 2020, those were crashes and significantly bigger than previous recessions. See another commenter’s chart here: https://fred.stlouisfed.org/series/GDPC1 https://fred.stlouisfed.org/series/GDPC1
  - dragonwriter 4y ago
    2001 was a short and mild recession (and was widely debated up until shortly after 9/11, and then often blamed on 9/11 even though it started six months earlier.) It felt worse and later because lots of people suffered from the poor distributional features of the following expansion more than the recession itself.

tablespoon 4y ago

No, it's obvious we're not in a recession. The fact that an election is coming up totally disproves the idea to any sane person whose beliefs are grounded in reality.

paulryanrogers 4y ago
Guessing this is sarcasm, yet it's not clear to me what the joke is. That the ruling party will always deny there's a recession near an election?
- TeeMassive 4y ago
  Bill Clinton didn't
- scottLobster 4y ago
  Pretty much. See also Republicans blaming Biden for every gas price increase and Democrats taking credit for every price decrease, whether they had anything to do with it or not. Typically an administration that's in charge during a recession doesn't do well in elections, so they deny it as long as possible.
- tablespoon 4y ago
  It's more about how political affiliation defines "objective reality."

mormegil 4y ago

A different view of basically the same topic by Noah Smith: https://noahpinion.substack.com/p/yes-were-probably-in-a-recession https://noahpinion.substack.com/p/yes-were-probably-in-a-rec...

TeeMassive 4y ago

I don't mind changing a definition for a better one. But the WH did not do this. They just unilaterally claimed that "this two quarters of negative growth is not the definition" to shut all other questions about the economy slowing down.

zmgsabst 4y ago
Their strategy worked for COVID[1], why wouldn’t they keep doing it? [1] — denying inconvenient facts, redefining terms, and using social media to censor/propagandize. Now Facebook is “fact checking” economists. https://www.foxnews.com/media/economist-slams-facebook-absolutely-orwellian-fact-check-upholding-bidens-recession-denial https://www.foxnews.com/media/economist-slams-facebook-absol...
scrlk 4y ago
>"In the end, the Party would announce that two and two made five, and you would have to believe it. It was inevitable that they should make that claim sooner or later: the logic of their position demanded it. Not merely the validity of experience, but the very existence of external reality, was tacitly denied by their philosophy. The heresy of heresies was common sense. And what was terrifying was not that they would kill you for thinking otherwise, but that they might be right. For, after all, how do we know that two and two make four? Or that the force of gravity works? Or that the past is unchangeable? If both the past and the external world exist only in the mind, and if the mind itself is controllable—what then?" - Nineteen Eighty-Four
generj 4y ago
Except that’s never been the definition. For decades the definition has always been “whatever NBER says.” Two quarters of negative growth is a convenient shorthand because NBER takes their time declaring a recession, and it is generally true Several recent recessions don’t match the two quarters of negative growth rule.
- TeeMassive 4y ago
  > Except that’s never been the definition. That's not true. Economists have given definitions and the one considered the de facto standard was two quarters of negative growth, which was a very good predictor of recessions in our lifetime: https://corporatefinanceinstitute.com/resources/knowledge/economics/recession/ https://corporatefinanceinstitute.com/resources/knowledge/ec... > Recession is a term used to signify a slowdown in general economic activity. In macroeconomics, recessions are officially recognized after two consecutive quarters of negative GDP growth rates. In the U.S., they are declared by a committee of experts at the National Bureau of Economic Research (NBER). https://www.forbes.com/advisor/investing/what-is-a-recession/ https://www.forbes.com/advisor/investing/what-is-a-recession... > In 1974, economist Julius Shiskin came up with a few rules of thumb to define a recession: The most popular was two consecutive quarters of declining GDP. A healthy economy expands over time, so two quarters in a row of contracting output suggests there are serious underlying problems, according to Shiskin. This definition of a recession became a common standard over the years. > For decades the definition has always been “whatever NBER says.” They actually have their own definition, but it's more lose and more inclusive: https://www.forbes.com/advisor/investing/what-is-a-recession/ https://www.forbes.com/advisor/investing/what-is-a-recession... > NBER has its own definition of what constitutes a recession, namely “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.” And from the NBER itself: https://www.nber.org/business-cycle-dating-procedure-frequently-asked-questions https://www.nber.org/business-cycle-dating-procedure-frequen... > Most of the recessions identified by our procedures do consist of two or more consecutive quarters of declining real GDP, but not all of them. In 2001, for example, the recession did not include two consecutive quarters of decline in real GDP. In the recession from the peak in December 2007 to the trough in June 2009, real GDP declined in the first, third, and fourth quarters of 2008 and in the first and second quarters of 2009. Real GDI declined for the final three quarters of 2001 and for five of the six quarters in the 2007–2009 recession. This is where the WH's manipulation comes in. They say it's not the actual definition, but what they don't say is that the other definitions are more likely to identify 2022 as the beginning of a recession. > Several recent recessions don’t match the two quarters of negative growth rule. How many times there was two or more quarters of negative growth that wasn't a recession?

Invictus0 4y ago

The market peaked at 480, it's at 410 now and rising. 410 seems like a fair price to me--some silly tech valuations got wiped out but many companies are still forecasting strong demand in H2. It's certainly not the cataclysm many people were expecting a few months ago.

zmgsabst 4y ago
That’s a 14% drop. Do we have a reason to believe this is a recovery versus a “dead cat bounce” caused by market irrationality and hope? - - - - - As an aside, you should list specifically what index you’re referencing as “the market”, so other people can check the numbers themselves.
- Invictus0 4y ago
  Suppose we could determine the "true" value of every company in the market. If the price at peak was greater than the true value, and the price now is the true value, then do you still call it a "recovery?" When you account for inflation, the price of stocks hasn't gone up all that much since 2020. I think most casual observers forget this analysis.
- rightbyte 4y ago
  Counting in inflation the drop is probably around 24%(?) in real value.

helen___keller 4y ago

The “recession debate” has to be the most stupid thing to come this election cycle. I guess I’ll take it over “her emails” and “his latest tweet”

nyokodo 4y ago
> I guess I’ll take it over “her emails” and “his latest tweet” It’s not as cringe inducing but considerably worse in other respects. Wikipedia didn’t take sides in the definition of email or tweeting to benefit one party in those previous elections.
- lalaland1125 4y ago
  Did you look at the Wikipedia edit logs yourself or is that an impression you got secondhand from a partisan news source? If you look at the logs it's pretty clear that Wikipedia didn't take sides here.
albatross13 4y ago
- helen___keller 4y ago
  You’re entitled to your opinion but personally having it as a spotlight issue for months seemed like an utter waste of air to me
  - mikeyouse 4y ago
    Especially with 1/100th the time and energy spent on most of the next administration using personal email / signal / other self-deleting apps to run the government. Utterly bizarre how "her emails" dominated the coverage for a cycle.
  - hatware 4y ago
    It's only a waste of air if you don't understand the security implications.

pavlov 4y ago

The United States of America has become a place where 60% of people are actively rooting for their country to do worse whenever their guy is not in charge. (40% of people are too busy making ends meet to even think about voting, or whether they identify with tribe A or B.) You can't really build anything with that kind of attitude. A democracy can't work if you start imagining half your compatriots are enemies, and you'd rather blow up the entire place than let them decide anything.

leereeves 4y ago
There's a difference between rooting for the country to do worse and acknowledging that it is doing worse, and we shouldn't shy away from the latter out of frustration with the former. And real wages fell 3% in six months [1] (i.e. over the first half of this year, wages fell at a 6% annual rate), so I think it's time to acknowledge that the nation is doing worse, at least for the working class. 1: https://www.statista.com/statistics/216259/monthly-real-average-hourly-earnings-for-all-employees-in-the-us/ https://www.statista.com/statistics/216259/monthly-real-aver...
albatross13 4y ago
Amen. Now we just need to take the next logical step into balkanization and we can start making real progress. I have no right voting for federal candidates in my midwest region that can influence legislation that impacts new york, and vice versa. Regionality > Nationality tl;dr america is geographically too big and it's really starting to show.
- pfisch 4y ago
  This would result in worse economic conditions for everyone. Just look at brexit.
  - albatross13 4y ago
    Fine by me- my state grows its own food (both meat and vegetables), exports plenty, and is sparsely populated. I reckon we'd be fine. True to the OP's point: I don't really care what happens to the east/west coasts. These people have been trying to legislate my rights away for decades now, so I am very apathetic to their plights.

Lendal 4y ago

We have an oil-based economy. It is impossible to raise the price of gas & diesel for an extended period of time without triggering a recession. I don't know why we focus so much on interest rates and politicians when it's oil prices that actually have much more of an effect on the economy, not interest rates, political slogans, or anything else.

ch4s3 4y ago
> I don't know why we focus so much on interest rates It directly effects the supply of money which is a direct lever on the economy.
fennecfoxen 4y ago
We have a money-based economy. Not in the same sense as oil-based, but a lot of economic activity takes place because someone borrows money, uses it to buy something big, and then repays the lender over time. This is true of homes and renovations. This is true of college degrees. This is true of many automobiles and major appliances. This is true of major government infrastructure projects. This is not directly true of factories and shipping companies and and startups, but even these compete for their funding with everything else that seeks funding. The price of money up front is a big deal.
throwaway894345 4y ago
Inflation predated the oil crunch, but certainly the oil crunch exacerbated the problem. In general, economists probably understand the economy better than we do, so it's probably foolish to write them off in favor of some simplistic understanding of the economy.

eatonphil 4y ago

This is published on a Japanese newspaper but it was written by a Harvard prof: > Robert J. Barro, professor of economics at Harvard University, is a visiting scholar at the American Enterprise Institute and a research associate at the National Bureau of Economic Research [NBER]. What's kind of weird is that he points out that NBER (the group that, turns out, he works at) needs to be the one to officially "pronounce" it a recession. So he went public to say this despite the public group he works for not (yet) agreeing? Is he saying this in an official capacity as an NBER research associate or this is just his unrelated personal opinion?

deleted 4y ago
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zinekeller 4y ago
This is very likely his personal opinion from the looks of it.
- lern_too_spel 4y ago
  He's writing in his capacity as a member of the AEI, a conservative think-tank.
s1artibartfast 4y ago
I think is just providing some basic information and providing his opinion. For example, he clarifies that the NBER waits on average 7 months to declare a recession,and is essentially a retrospective assessment. However, it has never failed to declare a recession after two quarters GDP loss since WWII

thepasswordis 4y ago

I don't understand the debate around this. If the proverbial groundhog sees its shadow and Joe Biden agrees that we're in a recession, and then the press wing of the party starts agreeing that we're in a recession: who cares? Won't they just say it was the previous administrations fault anyway, and that we need to do things like pass the "inflation reduction act" to stop it?

scottLobster 4y ago
You think political/economic debates always have to be productive? :) Yeah it's a rather academic point. I guess some people like to actively rotate their portfolios as if their concerns about recession aren't already priced in. Otherwise you can make broad assumptions about what kind of job opportunities may exist over the next two years, how your company might do in a recession, etc and position yourself a little better. Perhaps it's not the right time to go for a risky consumer-facing startup, stuff like that. For my part seeing all the supply shocks, and the fact that the Fed might pivot to combat a serious recession, caused me to a sign a two year lease to lock-in a lower rate, as I believe we're not done with inflation yet.
- thepasswordis 4y ago
  But none of that should be related to the presidents current opinion.
  - s1artibartfast 4y ago
    It does have an impact on tax and budget policy - something the president is directly involved in. If deficit spending is driving up the cost of living for most Americans, is now a good time to do it. If Most Americans are having more trouble paying their bills, should we increase government spending.
matwood 4y ago
> Won't they just say it was the previous administrations fault anyway Given the timescale for large economic changes (excluding something like a covid shock), it's almost always the prior admins fault - both good and bad.

rel2thr 4y ago

I think we are in a recession but it’s not that bad Earnings from google and other profitable tech companies have been really good There are some layoffs but really only in companies that over hired This is a very mild downturn , not doomsday

adamredwoods 4y ago

I personally don't think we should be so beholden to the GDP as the ultimate indicator for the health of any nation. It should be one of many. NBER states it is 'declined economic activity' leaving the door open for interpretation by many economists. https://www.nber.org/research/business-cycle-dating https://www.nber.org/research/business-cycle-dating BEA (as referenced from the article): https://www.bea.gov/news/blog/2022-07-28/gross-domestic-product-second-quarter-2022 https://www.bea.gov/news/blog/2022-07-28/gross-domestic-prod... FRED chart, to give perspective that the real GDP dip is very slight: https://fred.stlouisfed.org/series/GDPC1 https://fred.stlouisfed.org/series/GDPC1

zinekeller 4y ago
> FRED chart, to give perspective that the real GDP dip is very slight Looking at it, except for 2008 it seems that the dip is mild (for example the 1970's oil crisis have a very mild slope).
- s1artibartfast 4y ago
  The dip looks larger than every recession since 1950 with the exception of 2008 and 2019

coldtea 4y ago

Can't be, since me and my 10% friends haven't been affected /s

rufus_foreman 4y ago
That's the traditional definition. When your friends get laid off, it's a recession. When you get laid off, it's a depression.

deleted 4y ago

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rob74 4y ago

Politics aside, as a non-native speaker this makes me think of the word "likely". If you use it, just how likely is the event that you apply it to? Is it equivalent to "probably", or to "possibly"? In German we have "wahrscheinlich", which is the same as "probably" (and "Wahrscheinlichkeit", "probability" and "likelihood" are synonyms), so that would mean "likely" is the same as "probably"?

ajkjk 4y ago
In this title I feel like the word "likely" is a bit inappropriate and "probably" would make more sense. "Likely" implies a bit more.. probabilistic reasoning, whereas gauging a recession is more a question of how you define it. But here, I guess, it's just being used as a slightly more professional way to say "probably", and should be taken to mean exactly the same thing in this case.
jack_squat 4y ago
If something is "likely", I would assume it's more likely than not.
guitarbill 4y ago
There is another possibility: stating something as a fact could have legal implications (especially if it isn't "true"), but stating an opinion is often fine. So, I would read this as "Our opinion is the U.S. economy is in a recession (not a fact)", despite the article trying to convince you. It even finishes off with > "we can be highly confident that the U.S. economy entered a recession early in 2022." which is stronger than "likely", but still shy of saying that it is so.
xanaxagoras 4y ago
Yes, this usage is basically "wahrscheinlich". Here it is a rhetorical device to soften the author's conclusion: > The bottom line is that, with the announcement on July 28 of a two-quarter GDP decline, we can be highly confident that the U.S. economy entered a recession early in 2022. This will usually be the case. When something is likely X it is probably X, not possibly X.

dia80 4y ago

Define recession?

fennecfoxen 4y ago
“a significant episode during which economic output falls”

s1artibartfast 4y ago

I fundamentally don't understand how low unemployment is a counterclaim against economic recession. This is like saying sure you can't buy as much bread, but at least you are working longer. The fact that more people are working to produce less than before describes an economy in decline. Working more or longer isn't a good thing in its own right. In fact, it is bad it you are working more for less purchasing power. Employment growth has historically been associated with increased purchasing power, but the current situation is a deviation from this norm. Talking about employment growth ignoring this fact is a bit of a bait and switch playing on this incorrect association.

37 4y ago
Exactly this, hit the nail on the head. If anyone thinks this isn't all happening because US mid-terms are coming up, they are delusional or lying to themselves.
vouwfietsman 4y ago
Forgive my ignorance here, but isn't it simply better for the economy to have low rather than high unemployment? And since a recession is basically "the economy is doing bad" doesn't that mean that the unemployment argument is: "it may be doing bad, but not /that/ bad". And then the discussion is if the economy is doing bad enough to call it a recession, people point to low unemployment and say: no.
- s1artibartfast 4y ago
  There is a lot going on in this question, so I apologize if my answer doesn't address. It really comes down to what you mean by "better for the economy". When most people care about the economy, what they really care about is how much "stuff" they or the average person can buy. To one extreme, many people would still be unhappy if the GDP and "economy" doubled, but only 10% of people were working. Either 90% of people would be going without, or they would be on some sort of welfare taxed from the 10%. To the other extreme, many people would be unhappy if there were 100% employment, but all you could buy with it is a loaf of bread. The ideal is to have high labor demand (usually associated with high employment) and growing GDP. This means that people who want to work can easily get a job, and the amount of "stuff" they can get from working keeps going up.

D_Alex 4y ago

This would be the first recession ever featuring near-record-low unemployment. if anyone has any insights on how we are having an economic contraction AND such low unemployment, I'd love to hear them.

Fauntleroy 4y ago
Way higher capacity for underemployment with the "gig economy", which was less prevalent in previous recessions.
- D_Alex 4y ago
  OK this is a plausible explanation.
markburns 4y ago
Low wages, high inflation, general financialization of everything resulting in more people working or working multiple jobs to keep their heads above water. Much less expendable income means economic contraction.
- D_Alex 4y ago
  >more people working or working multiple jobs This should cause the opposite of a recession, no? More people working --> more GDP, right?
  - markburns 4y ago
    Just working more to afford necessities isn't the same thing as putting money back into the economy. Less disposable income across society means lower economic activity.
kk6mrp 4y ago
Stagflation?
- 4y ago

AlwaysRock 4y ago

What a mess this comments section is. Something to keep in mind is that many of the folks who read hn are in tech. You're less likely to feel the immediate effects of a recession (job loss, inflation) than folks who are in other, lower demand and job security, fields. It doesnt FEEL like a recession to me but neither did 2008. That was a problem other people were having.

koheripbal 4y ago
Recession has always had a very specific and widely accepted definition in the financial academia - referenced in literally hundreds of academic papers. In my 25 years in finance, I've never even heard anyone debate the definition of recession. Even today, in finance and despite all the Twitter drama, no one I know in the field debates that we're in a recession. The only debate is on social media with some spillover into low quality media. I listen to the experts when it comes to climate change, vaccines, evolution, the curvature of the Earth... but somehow when it comes to finance, no one on social media wants to listen to the experts in the field. Nobel prizes, lifetimes of academia, respected leaders in the field - they all must be liars because some Twitter personality and a Wikipedia mob tell me different. We need better reputation systems.

silent_cal 4y ago

The "uniparty" at work. Am I really supposed to believe that the NBER is non-partisan? If Trump were still president every news outlet would be screaming recession by now, and if you denied it you'd be ridiculed for "disagreeing with experts". We are completely surrounded by political propagandists disguised as impartial institutions. Dislike Trump all you want, but you can still call a spade a spade.

knewter 4y ago
If you denied it you'd have a banner in your post explaining that there is in fact a recession, and you'd be stripped of your ability to speak with your friends on {{ .platform }} until you removed your opinion.

bryanlarsen 4y ago

IMO, both sides of this debate are right. They're both saying subtly different things. True statements: - We are likely in a recession - We do not yet have numbers proving we are in a recession - We have some numbers that show we're in a recession - We have some numbers that show the recession didn't start in Q1 - If the numbers from Q3 are similar to the numbers in Q2 we will be in a recession by almost any definition False statements, which neither side are saying: - We have numbers proving we're in a recession - We're not in a recession

zackmorris 4y ago

I had an insight last night about inflation, and why it's not what we're experiencing today. Prices on convenience and entertainment have roughly doubled since the pandemic where I live. A cocktail was $7 in 2019, today it's more like $13. Milk at the gas station was as low as $3.50 but is now $5. Food delivery charges are ridiculous and unsustainable, but hey at least the services exist. High prices open the door to competition. Anyone can mix a cocktail for less than $13. Anyone can come up with a better way to deliver food or start a food truck. So the price gouging "inflation" we see today from corporations and established businesses leaves them vulnerable. If the economy really tanks and commercial real estate becomes worthless as projected, there's going to be so much entrepreneurship, just like in the early 2010s after the Housing Bubble popped. Not only that, but people are hyper-aware of stuff like rent seeking now, so may even buy out their landlords, form co-ops, avoid having an employer or standard work hours, basically do all of the things that should have probably happened 20 years ago after the Dot Bomb. But we got distracted by the War on Terror, which is transitioning to the War on Authoritarianism as people wake up. If Wall Street tanks, that will be better for Main Street. Having spent my entire adult working life barely surviving, I just don't care if established players go bust. This is a B.S. economy where maybe 3-10% of the population does any real work (like growing food) and everyone else takes whatever menial service job they can get or skims money off their employees. It's a joke. Anyone could do a better job managing the economy if we would ever do the most obvious things like tax the rich.

rrrrrrrrrrrryan 4y ago
> If the economy really tanks and commercial real estate becomes worthless as projected, there's going to be so much entrepreneurship Entrepreneurship always ramps up during the hard times. People lose their jobs and are forced to get scrappy. > High prices open the door to competition. Anyone can mix a cocktail for less than $13. Consumers became desensitized to price increases during the pandemic supply shortages. Right now, there's strong evidence to suggest that many businesses are simply raising prices because they can get away with it. If you're running a business, you have a once in a lifetime opportunity to jack up prices without harming your brand - you can just shrug and blame the abstract specter of "inflation" and your customer base directs their frustration toward some political entity instead of you. In the short-term it's a no-brainer; especially when everyone around you is doing it. But in the medium-to-long-term, you're 100% correct that it leave you vulnerable to being undercut by new entrants to the market.