Rearview Economics

Is it just coincidental that within a month after the Presidential election the national Bureau of Economic Research announced the

U.S.

has been in recession since last December or for almost one full year? If we recall, 12 months ago the Fed Chairman, the President, and other senior government officials as well as many leading corporate economists were suggesting the economy was weakening, but could avoid recession. Back then I said in this blog that it was in the interests of government and corporate forecasters to provide glass-half-full outlooks. The Fed Head can't be viewed talking down the economy and the financial institution economists don't want to hurt firm business by issuing doom and gloom predictions. That's a good way to lose your job.

 

Hey I'm no genius and certainly no economist, but it seemed pretty obvious a year ago that if we weren't in recession we were on the cusp without any way to avoid it, and I wrote so matter of factly in this blog. The stock market had begun its nosedive and unemployment was rising. The housing crisis had begun to sink consumer confidence and it appeared the leverage binge was about to cause big headaches for many people with a surfeit of loans. 

 

Despite all this and ensuing bad news on all fronts, the President, the Fed, the Treasury Secretary, and the Republican presidential candidate were proclaiming the economy's sound fundamentals up until the Lehman Brothers collapse in mid September. Bailouts, Presidential debates, and another stock market swoon followed, but still no recession signal. Might that throw unwanted terminology into the political give and take?

 

And now after careful calculations, we find out that during the entire primary and general election campaigns we were actually officially in recession. And in fact, this recession has already lasted longer than either the 2001 or 1991 versions. Talk about looking in the rear view mirror! Do these economic forecasters have blinders on or were they just in the tank for the former party in power? Maybe some of both.

 

 

Comments

[Sgc]

Yes, it probably is. If you look up past recessions, NBER is always very careful, and therefore very slow, in calling them.

That's the difference between economists and columnists--columnists "call it like they see it," where economists will look for more confirmation and quantification, even at the cost of only confirming what "everybody knows." Because every once in a while what everybody knows is wrong.