I know this is not a particularly exciting topic. If I had done a piece on International Beer Day, which as everyone knows was August 5, then perhaps there would be a lot more interest. And yes, I’m sure that as I write this blog, there are still some people celebrating. International hangover day is January 1.
Can one word have more than one definition? I caught a bit of Sean Hannity show on Fox News, and it seemed he really had difficulty with this idea. His favorite definition of recession is two quarters of negative GDP growth. And, so by this definition, we are in one. He really made a big deal that the Democrats were hiding something big. They weren’t and he is wrong.
There is a second definition, which is also real simple. The National Bureau of Economic Research (NBER) panel of 8 economists makes a formal declaration that the country is in one, using all the relevant data. This hasn’t been done yet. They meet in secret. Economic data always lags behind the actual events, so economists at NBER back date the onset or end of recessions.
Case in point is the 2020 recession created by Covid-19 health restrictions. With health shut down, economic activity was cratering in February to March 2020. Unemployment of course was soaring, as businesses shut down or restricted the number of people inside their business. However, NBER had to wait for the jobs data. So, on June 8, 2020, they announced a recession had begun back in February. Of course, by then, it was obvious to just about every living sole who worked in the hospitality area, we were in a recession. Then, 17 months later, on July 19, 2021, the NBER declared the recession had ended in April 2020. Yes, you read that right! So, the June 8, 2020 announcement, the NBER was declaring we were in a recession, when it had already past. Don’t believe me- read the following links:
Ok. The nice way to avoid the topic is to admit that economic contraction is likely, then change the topic quickly to something everyone can agree on, like why International Hangover day is not on August 6, immediately following International Beer day.
The second quarter GDP decline was only 0.9%, as reported on July 28, 2022. The second quarter is from April to June 2022. So, it is likely economists are looking at other data, including unemployment. If we are in a recession, then unemployment should be going up. Latest numbers show the unemployment rate is slightly lower.
Sean Hannity is a Fox News commentator, who enjoys bashing Democrats. Incumbent presidents rarely get re-elected if there has been a recession within 2 years of their re-election. Donald Trump had the misfortune to be running for re-election in 2020, during the Covid recession.
So Hannity’s rant was pure politics.
But, there are real concerns. Inflation is real, and with high gas prices, consumers may spend less. So, a contraction in the economy, brings down inflation. But, it should cause unemployment to increase. So be careful what you wish for. Do you want gas prices back to $3.50/gallon or job security?