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I feel like a broken record but, the 'Two quarters' rule is an unofficial metric that does a bad job of representing recessions when you back-test it (no recess
by RC_ITR 4y ago
I feel like a broken record but, the 'Two quarters' rule is an unofficial metric that does a bad job of representing recessions when you back-test it (no recessions from 1992-2008 in that case).
In the US, a recession is defined by NBER after the fact.
- danuker 4y agoThen the "two quarters" rule is stricter. We have fulfilled a stricter criterion for a recession. Whether the NBER contradicts us is irrelevant. Less value is going around in the economy.
- mywittyname 4y agoI mean, if you're going to stick to the two-consecutive quarters definition, then you would be saying that we were in a recession, and are now out of one. Third quarter GDP estimates stand at 1.9% growth.
- sieabahlpark 4y agoEstimates or reported? The recession based on two consecutive quarters is on reports not estimates of what is to be reported.
- mywittyname 4y agoReported as of current monthly figures. Estimates are even higher. Keep in mind that the "two consecutive quarters" is just snapshots of the monthly data at 3 month marks. They get revised over time. It's completely possible that data from Q2 will be revised upwards and there won't be two consecutive quarters of negative GPD in the future. The Q2 data has already been revised upwards once.
- zeroonetwothree 4y agoGDPNow has it at 2.9% even
- rjcjvyd77 4y agoThen we are out of recession? Find a new word for whatever you're describing because the rest of us are speaking the same language.
- pishpash 4y agoThat's too noisy given inflation is 6.6%.
- RC_ITR 4y agoReal GDP We've only recently seen nominal GDP declines in 2008 and 2020.
- pishpash 4y agoI know it's real GDP. I'm saying this number is noisier when inflation is high because you only ever measure nominal GDP and then deflate.
- RC_ITR 4y agoOk, let's play your game. How much of the first quarter decline was due to the ports clearing and imports rising? Here, I'll give you a hint (More than 100%): https://fred.stlouisfed.org/graph/fredgraph.png?g=UOxC https://fred.stlouisfed.org/graph/fredgraph.png?g=UOxC Do you think that's a real recession indicator? EDIT: Said differently, if our imports were at 4Q:21 levels, we'd have 0 quarters of decline. So is this the first import-driven recession? Because no other recessions have been like this.
- pishpash 4y agoDoesn't matter the reason, net net less goods were produced. Imports couldn't stay at 4Q:21 levels forever, only the timing of the imports was shifted around.
- RC_ITR 4y ago>Doesn't matter the reason, net net less goods were produced. That's not how GDP works? It's not adding up all the things that were made, it's measuring the value an economy produced. A quirk of that is imports are value an economy consumes (usually offset by Foreign Direct Investment). If those ships decided to bail from LA and head to Japan, would the economy have 'produced less'?
- pishpash 4y agoIsn't your whole point that goods were already paid for in one quarter but were held up until the next quarter to clear? If consumption and import were in the same quarter then it doesn't affect GDP at all in an accounting sense. But in your example, you get a +GDP in the quarter that consumption happened, making it seem like domestic production went up, then against that baseline you get a -GDP "due to" imports the next quarter, so you must "lose" the domestic production as a correction. If the ships bailed and stole your money or destroyed their goods I'm not sure if that still counts as imports or not.
- RC_ITR 4y ago
- RivieraKid 4y agoNo, it's not stricter. It's a rule of thumb, an approximation.
- roflyear 4y agoNo. It could also just be pointless. In isolation what does two quarters of negative growth mean? It obviously doesn't mean a bad economy, not always. The economy was awful plenty of times and GDP grew.
- nostromo 4y ago> In the US, a recession is defined by NBER after the fact. This isn't true. There is no "official" declaration of recessions in the US by law. Yes, some federal officials will reference NBER, but that's not the same thing. Bar far, the most common definition used worldwide is two quarters of negative growth -- and by that definition we're already in a recession. NBER itself has never not declared a recession after two quarters of negative growth. I think a lot of folks don't even know that NBER isn't a government organization. It's a private non-profit with a bunch of self-appointed academics that don't even publicly disclose their meeting notes or their criteria for what a recession is. People treat them like the Oracle of Delphi and it's very misplaced.
- RC_ITR 4y ago> In general usage, the word recession connotes a marked slippage in economic activity. While gross domestic product (GDP) is the broadest measure of economic activity, the often-cited identification of a recession with two consecutive quarters of negative GDP growth is not an official designation. The designation of a recession is the province of a committee of experts at the National Bureau of Economic Research (NBER), a private non-profit research organization that focuses on understanding the U.S. economy. From: https://www.bea.gov/help/glossary/recession https://www.bea.gov/help/glossary/recession Do you not consider the BEA an official source? Because I have bad news for you about who tracks GDP if so. EDIT: and if you’re going to try to wriggle around with the “by law” part of your statement, there’s no legal definition of GDP. EDIT2: And, just to cut you off at the pass, here's the archive from 2019 with the same exact text: https://web.archive.org/web/20190831041001/https://www.bea.gov/help/glossary/recession https://web.archive.org/web/20190831041001/https://www.bea.g... EDIT3: Going for the trifecta, from 1960-2011, NBER had never not declared a recession after one quarter of decline. And in its history, only 1955/1957/2011/2014 break that rule! US GDP just doesn't decline very often in general! And as I've said in other comments this is the very first time that the effect is explained mostly by net exports.
- throwawaylinux 4y agoStill, let's not pretend the narrative has been recently "adjusted". https://www.businessinsider.com/trump-appears-to-misunderstand-definition-of-recession-2019-8 https://www.businessinsider.com/trump-appears-to-misundersta... "Recessions are generally defined as being six consecutive months of negative economic growth. By this definition, there is no such thing as a two-month recession." Obviously that is a very widely used and well accepted definition of recession including among experts and industry journalists. The idiotic thing is that's recently being claimed is that's not an "official" definition of recession, as though that makes any difference or makes someone incorrect for using the definition. A government's definition of a word gives it no more weight than anybody else's definition of that word, outside the duties of that government. Arguably the two-quarters rule is the preferred definition because it is more widely used and known. And let's be honest, that definition certainly would be put to use by its most fervent deniers today if there were different politicians in office.
- didibus 4y agoI feel like non-officially most people think of a recession simply in terms of like are less and less people able to make ends meet and less and less able to afford the same luxuries as they did before.
- RC_ITR 4y agoSure, and by those metrics: We are at an all-time high in terms of people employed: https://fred.stlouisfed.org/graph/fredgraph.png?g=UysZ https://fred.stlouisfed.org/graph/fredgraph.png?g=UysZ People are consuming more than ever before (even accounting for inflation): https://fred.stlouisfed.org/graph/fredgraph.png?g=UOQs https://fred.stlouisfed.org/graph/fredgraph.png?g=UOQs Now, to be my own Devil's Advocate, real wages are falling (though they are at about where they were pre-pandemic: https://fred.stlouisfed.org/graph/fredgraph.png?g=SxFv https://fred.stlouisfed.org/graph/fredgraph.png?g=SxFv Compare that to even a mild recession like 1990, where we were 2mn below peak employment, real PCE was falling and real wages were falling. The above is exactly why shorthand rules are not the best tools.
- harlequinn77 4y ago
- eek2121 4y agoI disagree with all of you. Why? I learned in middle school that a 'recession' is defined by multiple consecutive months of GDP shrinkage. That is it. That is why most experts think we are "heading" into a recession without being in one, and news flash: they are right. My normal skepticism tends to go out the window when that particular definition pays dividends over and over again.