Is America in a recession? Sure we are. After all, the media say we are. Political candidates say we are. Our friends who are underwater on their homes say we are.
But the actual economic numbers? Well, not so much. The Commerce Department said today that the economy grew at a 1.9 percent annual rate in the second quarter. (A number that may well be revised higher.) What's more, revised first-quarter growth came in at 0.9 percent. Yes, the fourth quarter of 2007 was revised downward to a negative 0.2 percent, but the third quarter was revised way upward to 4.8 percent from 3.8 percent.
So, in short, the past four quarters were 4.8 percent, -0.2 percent, 0.9 percent, and 1.9 percent (the last one possibly with a bullet). That certainly does not meet the rule-of-thumb recession definition—back-to-back negative quarters. Nor do those numbers meet the recession definition of the National Bureau of Economic Research unless the economy totally falls off a cliff from here on out.
But so what? Let's just come up with any definition we want to meet our political objectives or justify our recession predictions. Take a look at this howler from the economic consulting firm Global Insight. (Generally, I like its work very much.) According to Chief Economist Nariman Behravesh, "Based on these numbers, it is a safe bet that the domestic economy (excluding net exports) has been in recession since the end of last year."
Oh, that's right—exclude exports. It's not like the ability to sell your wares to the rest of the planet is important. The fact is, net exports had their strongest showing since 1980, adding 2.4 percentage points to real GDP growth. But ignoring inconvenient numbers is so much easier when the opposite reality would serve you so much better. For instance, the liberal New America Foundation just came out with a proposal to have the government spend hundreds of billions of dollars a year on infrastructure and alternative-energy projects. (The whole thing looks a lot like the $5 trillion Al Gore plan.) Here is its economic justification:
The American economy is in trouble. Battered and bruised by the collapsing housing and credit bubbles, and by high oil and food prices, it is having trouble finding its footing. The stimulus medicine the Federal Reserve and Congress administered earlier this year is already wearing off, while home prices are still falling and unemployment continues to creep upward. By the time a new president is sworn in, there is a good chance the economy will have stalled again, and the hope for a relatively quick rebound will have given way to the fear of a protracted slowdown.
See, for some people, a recession—at least predicting one—is good for business.