5 ms·

Calling something a recession whilst unemployment is incredibly low (3,5% in the US, 3,4% here in the Netherlands) seems quite silly. I'm not sure what to call

Calling something a recession whilst unemployment is incredibly low (3,5% in the US, 3,4% here in the Netherlands) seems quite silly. I'm not sure what to call it at the moment, but it's hard to compare to previous recessions. I'm at least a lot less worried about it. Additionaly wages seem to be a lot higher than they've been for a long time for what was previously low wage work.

mynameishere 4y ago
Yes, using the correct definitions of words is very silly, especially when it is politically inconvenient. Very, very silly.
- bumby 4y ago
  What is the correct definition?
  - kspacewalk2 4y ago
    The correct technical definition in the UK an Canada (and possibly other countries) is two consecutive quarters of negative GDP growth. By that definition, the US is in a recession, case closed. But this definition is not widely used in the US. So its "correctness" is geographically dependent.
    - bumby 4y ago
      >By that definition, the US is in a recession, case closed. That's like saying "Your physical health is defined by your BMI, case closed." NBER has published work going back 40 years that demonstrates why a simplistic measurement of contraction duration is flawed.[1] Just like your physical health, economic health should really be measured holistically across different aspects. [1] https://www.nber.org/books-and-chapters/business-cycles-inflation-and-forecasting-2nd-edition/what-recession https://www.nber.org/books-and-chapters/business-cycles-infl...
      - mikhailt 4y ago
        The fact the BMI is determined by a "simple" formula doesn't change the merit of the original statement. If an insurance company uses BMI to determine your physical health, then yes, it is case closed. It doesn't matter how unrealistic it is, it doesn't matter what any research has shown. It is based on a strict definition set by the insurance company that defined how it is calculated. If a different company wants to use a different approach, then they're free to do so, no one is forced to use BMI to calculate their health. However, if we want to determine if a country is in recession by comparing to a specific country's definition of recession, which is what the OP just did, then the case is closed (by that definition). > Just like your physical health, economic health should really be measured holistically across different aspects. Unfortunately, the world and people that live in it doesn't work like this. A lot of people like simple calculations even if it is wrong, outdated or not realistic. It's easier for people to say recession is determined by two quarters of two consecutive quarters of negative GDP growth. A few countries use this as mentioned by the OP. It is case closed by this specific _strict definition_ of what a recession is.
        bumby 4y ago
        >It doesn't matter how unrealistic it is From a rules-lawyering perspective, this is true. But I believe the true intent of determining if a country is in a recession or not is not about semantic gamesmanship, but about how accurately we can represent reality because the fidelity of that representation is what drives policy. That fidelity is what matters in terms of "correctness". If I say the official definition changes to whether or not a groundhog sees his shadow on a particular day, that's probably not the best way to represent economic health as a means of crafting policy even if it's "official" by fiat. Let's not miss the forest for the trees. Policy is what matters because it's what ultimately impacts peoples lives.
      - kspacewalk2 4y ago
        >That's like saying "Your physical health is defined by your BMI, case closed." No, it's like saying "Your BMI is defined by the following formula, case closed". This is treated as a technical term by economists, with an actual definition. But it also has a more ambiguous colloquial use. Personally, I think the media should use a more quaint, wishy-washy term like "slowdown" and leave "recession" to the economists to define as two consecutive quarters of negative GDP growth. >NBER has published work going back 40 years that demonstrates why a simplistic measurement of contraction duration is flawed.[1] Just like your physical health, economic health should really be measured holistically across different aspects. Or yeah sure, call it "economic health". Even better, throw a "holistic" in there and it will forever remain in the realm of the squishy soft sciences.
    - deleted 4y ago
      [deleted]
scrlk 4y ago
Unemployement rate is known to be a lagging indicator.
- joshuahedlund 4y ago
  Is it, though? I'm looking at the Fed's chart[0] and it looks like unemployment goes up right from the beginning of the recession gray bars, in pretty much all of them. Sometimes it even starts before the bar. But we're supposed to be half a year into one with the unemployment rate going down? [0] https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE
MontyCarloHall 4y ago
>Additionaly wages seem to be a lot higher than they've been for a long time for what was previously low wage work. Yet another contributor to high inflation, which is a product of many factors, some good (e.g. less wage inequality) and some bad (e.g. supply chain shortages, energy prices, excess government stimulus).
rufus_foreman 4y ago
Real wages are falling and are below what they were pre-pandemic, https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q.
- MontyCarloHall 4y ago
  This can still be the case if wage growth went disproportionately to low earners who produce widely consumed goods/services, whose prices were deflated due to low wages. As an extreme example, suppose all farmers were unpaid slaves. Slavery gets outlawed, and farmers now get paid. Food prices rise dramatically, resulting in massive inflation overall (and thus a fall in real wages for everyone except farmers).
- bitshiftfaced 4y ago
  The labor participation rate is also still down 2% from pre covid levels.
  - bryanlarsen 4y ago
    Looks like 0.5% to me. https://tradingeconomics.com/united-states/labor-force-participation-rate https://tradingeconomics.com/united-states/labor-force-parti... Notably the rate for the under 50 crowd is up substantially, it's the retirees bringing the rate down.
    - lumost 4y ago
      If you have the means to retire, slogging through a few last bad years doesn’t sound great. It’s no surprise that some opted for early retirement since 2020, even if they are retiring at lower income levels then they wanted.
      - rufus_foreman 4y ago
        Depends on what your job was. I got fired at the end of 2019 and was thinking about retiring. Covid made it an easy decision to take another job, I was going to be sitting at home in front of a computer for a year or two anyway. For near retirees who had to go to work in person, it made much more sense to retire rather than to risk death in order to put a few more years worth of money in the 401k.
pauldenton 4y ago
Those unemployment numbers are cooked books. Look at the laborforce participation rate.

mynameishere 4y ago

Yes, using the correct definitions of words is very silly, especially when it is politically inconvenient. Very, very silly.

bumby 4y ago
What is the correct definition?
- kspacewalk2 4y ago
  The correct technical definition in the UK an Canada (and possibly other countries) is two consecutive quarters of negative GDP growth. By that definition, the US is in a recession, case closed. But this definition is not widely used in the US. So its "correctness" is geographically dependent.
  - bumby 4y ago
    >By that definition, the US is in a recession, case closed. That's like saying "Your physical health is defined by your BMI, case closed." NBER has published work going back 40 years that demonstrates why a simplistic measurement of contraction duration is flawed.[1] Just like your physical health, economic health should really be measured holistically across different aspects. [1] https://www.nber.org/books-and-chapters/business-cycles-inflation-and-forecasting-2nd-edition/what-recession https://www.nber.org/books-and-chapters/business-cycles-infl...
    - mikhailt 4y ago
      The fact the BMI is determined by a "simple" formula doesn't change the merit of the original statement. If an insurance company uses BMI to determine your physical health, then yes, it is case closed. It doesn't matter how unrealistic it is, it doesn't matter what any research has shown. It is based on a strict definition set by the insurance company that defined how it is calculated. If a different company wants to use a different approach, then they're free to do so, no one is forced to use BMI to calculate their health. However, if we want to determine if a country is in recession by comparing to a specific country's definition of recession, which is what the OP just did, then the case is closed (by that definition). > Just like your physical health, economic health should really be measured holistically across different aspects. Unfortunately, the world and people that live in it doesn't work like this. A lot of people like simple calculations even if it is wrong, outdated or not realistic. It's easier for people to say recession is determined by two quarters of two consecutive quarters of negative GDP growth. A few countries use this as mentioned by the OP. It is case closed by this specific _strict definition_ of what a recession is.
      - bumby 4y ago
        >It doesn't matter how unrealistic it is From a rules-lawyering perspective, this is true. But I believe the true intent of determining if a country is in a recession or not is not about semantic gamesmanship, but about how accurately we can represent reality because the fidelity of that representation is what drives policy. That fidelity is what matters in terms of "correctness". If I say the official definition changes to whether or not a groundhog sees his shadow on a particular day, that's probably not the best way to represent economic health as a means of crafting policy even if it's "official" by fiat. Let's not miss the forest for the trees. Policy is what matters because it's what ultimately impacts peoples lives.
    - kspacewalk2 4y ago
      >That's like saying "Your physical health is defined by your BMI, case closed." No, it's like saying "Your BMI is defined by the following formula, case closed". This is treated as a technical term by economists, with an actual definition. But it also has a more ambiguous colloquial use. Personally, I think the media should use a more quaint, wishy-washy term like "slowdown" and leave "recession" to the economists to define as two consecutive quarters of negative GDP growth. >NBER has published work going back 40 years that demonstrates why a simplistic measurement of contraction duration is flawed.[1] Just like your physical health, economic health should really be measured holistically across different aspects. Or yeah sure, call it "economic health". Even better, throw a "holistic" in there and it will forever remain in the realm of the squishy soft sciences.
  - deleted 4y ago
    [deleted]

scrlk 4y ago

Unemployement rate is known to be a lagging indicator.

joshuahedlund 4y ago
Is it, though? I'm looking at the Fed's chart[0] and it looks like unemployment goes up right from the beginning of the recession gray bars, in pretty much all of them. Sometimes it even starts before the bar. But we're supposed to be half a year into one with the unemployment rate going down? [0] https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE

MontyCarloHall 4y ago

>Additionaly wages seem to be a lot higher than they've been for a long time for what was previously low wage work. Yet another contributor to high inflation, which is a product of many factors, some good (e.g. less wage inequality) and some bad (e.g. supply chain shortages, energy prices, excess government stimulus).

rufus_foreman 4y ago

Real wages are falling and are below what they were pre-pandemic, https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q.

MontyCarloHall 4y ago
This can still be the case if wage growth went disproportionately to low earners who produce widely consumed goods/services, whose prices were deflated due to low wages. As an extreme example, suppose all farmers were unpaid slaves. Slavery gets outlawed, and farmers now get paid. Food prices rise dramatically, resulting in massive inflation overall (and thus a fall in real wages for everyone except farmers).
bitshiftfaced 4y ago
The labor participation rate is also still down 2% from pre covid levels.
- bryanlarsen 4y ago
  Looks like 0.5% to me. https://tradingeconomics.com/united-states/labor-force-participation-rate https://tradingeconomics.com/united-states/labor-force-parti... Notably the rate for the under 50 crowd is up substantially, it's the retirees bringing the rate down.
  - lumost 4y ago
    If you have the means to retire, slogging through a few last bad years doesn’t sound great. It’s no surprise that some opted for early retirement since 2020, even if they are retiring at lower income levels then they wanted.
    - rufus_foreman 4y ago
      Depends on what your job was. I got fired at the end of 2019 and was thinking about retiring. Covid made it an easy decision to take another job, I was going to be sitting at home in front of a computer for a year or two anyway. For near retirees who had to go to work in person, it made much more sense to retire rather than to risk death in order to put a few more years worth of money in the 401k.

pauldenton 4y ago

Those unemployment numbers are cooked books. Look at the laborforce participation rate.