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Fri Mar 27, 2020, 08:42 AM

Are we officially IN a recession yet? Or it still "looming/coming/on the horizon?"

And, if we aren't there yet, then is it still avoidable?

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Reply Are we officially IN a recession yet? Or it still "looming/coming/on the horizon?" (Original post)
Shell_Seas Mar 2020 OP
NewJeffCT Mar 2020 #1
Shell_Seas Mar 2020 #4
htuttle Mar 2020 #2
unblock Mar 2020 #3
Shell_Seas Mar 2020 #5
tinrobot Mar 2020 #6
Azathoth Mar 2020 #7
Igel Mar 2020 #8
Shell_Seas Mar 2020 #9

Response to Shell_Seas (Original post)

Fri Mar 27, 2020, 08:45 AM

1. We may unofficially be in a recession, but technically

a recession is two consecutive quarters of negative GDP growth. So, we won't get confirmation until the April-June GDP data comes out some time in July.

We're obviously going to be negative for Q1 with all that's happened in March. Trump is trying to head off a negative Q2 as well, which is partly why he's pushing the Easter date - the country (in his mind) would be open for 10-11 weeks of Q2.

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Response to NewJeffCT (Reply #1)

Fri Mar 27, 2020, 09:06 AM

4. Thank you for your thorough explanation.

I'm sure I read we're expecting Q2 to be pretty bad.

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Response to Shell_Seas (Original post)

Fri Mar 27, 2020, 08:46 AM

2. I think it takes a quarter or two 'officially' be a recession

...since that's part of the definition of 'recession'.

"In the United States, it is defined as "a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales".[3] In the United Kingdom, it is defined as a negative economic growth for two consecutive quarters.[4][5]"

https://en.wikipedia.org/wiki/Recession

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Response to Shell_Seas (Original post)

Fri Mar 27, 2020, 09:00 AM

3. as a practical matter, we're clearly having severe negative growth

the question is for how long. to some extent, it's a matter of trivia as to whether or not it will satisfy someone's definition of "recession".

for what it's worth, economists tend to talk about "contractions" instead, and we're clearly in a period of economic contraction, even if it turns out to be brief.

nber (national bureau of economic research) is widely regarded as the official arbiter of recessions, and here's their definition:

"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."

the "two quarters of negative gdp" definition commonly cited is a bit old and inaccurate, and vulnerable to calendar arbitrariness in addition to relying solely on gdp.


that said, both definitions require the negative growth to be sustained for a period of time. we clearly started negative growth a few weeks ago. in theory, if we could reverse the tide quickly enough, it wouldn't qualify as a recession. however, in practice, it's virtually impossible for the economic to halt its slide that quickly.

frankly it would take a miracle. even if a vaccine were to be announced today, it would take time to test, manufacture, distribute, and inoculate enough people to get everyone back to work and back to normal.


historically, nber pretty much always waits until very clear data has emerged to make their recession pronouncements. in practice, this basically means that any recession is nearly or already over by the time they announce it.

this time may be different, as the start of the recession was so clear and stark, they may make their announcement earlier than usual. that said, they'll still give it some time to make sure it's no a blip. though again, in practice, it's virtually impossible to see this not lasting long enough to be a recession per nber's definition.

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Response to unblock (Reply #3)

Fri Mar 27, 2020, 09:08 AM

5. Interesting. Thanks.

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Response to Shell_Seas (Original post)

Fri Mar 27, 2020, 10:09 AM

6. Two straight quarters of negative growth is the definition.

Not official for a few months at least.

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Response to Shell_Seas (Original post)

Fri Mar 27, 2020, 10:11 AM

7. Technically or realistically? Realistically we're in economic freefall

Technically it's not a recession until there's been two consecutive quarters of economic contraction.

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Response to Shell_Seas (Original post)

Fri Mar 27, 2020, 11:06 AM

8. Probably.

But the definitions weren't written for any of this.

Today's fun host dithering was the guy who tried to argue that what happened last week really *was* a bear market because it met the technical definition. That's how definition work, right?

But a short-term uptick in a long-term bear market (like the one we've had for forever, in the last 10 days or so) may meet the *technical* definition but really didn't count.

It was the same guy who argued in 2016 that the downturn in the markets that happened after Trump was declared likely winner was entirely due to Trump. But the next day, when they more than rebounded and Fox was saying it was because of Trump, he was emphatic: We really had to be crystal clear--it's hard to connect movement in the markets to specific political events, and anybody who tries just shouldn't be trusted and obviously has no clue. He said this with no sense of irony.

In this case, the definitions don't really work, either way. Recessions signal a certain set of changes, and are important because they show connections behind the scenes. If we say recession = unemployment, then just use "unemployment." China, for instance, has weird recessions--when there's a downturn, you manipulate the economy by just hiring more workers and ordering cash flow. It's so distorted that the words' meanings have to also distort.

COVID has warped the economy's space-time like a very fast spinning supermassive black hole. The best you can do is some descriptions, and keep things going as best you can, today, as your ship's ripped up apart.

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Response to Igel (Reply #8)

Fri Mar 27, 2020, 02:26 PM

9. Weeeee

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