"It's a recession," said former President Harry Truman, "when your neighbor loses his job; it's a depression when you lose yours."
For people facing home foreclosure, job loss or the struggle of paying high gas prices, the definition a recession seems immaterial and insignificant. True.
But during an election year, the media's constant use or expectation of "recession" does matter. Sen. Barack Obama, the Democratic Party's likely nominee, already considers the U.S. economy "in a recession."
So are we -- at least as economists commonly define the term?
No -- not even close.
But a recent typical news wire story, however, goes like this: "(George W.) Bush's news conference … appeared to be a pre-emptive measure of sorts, as it came a day before the release of statistics on the nation's gross domestic product for January through March. The common definition of a recession is two consecutive quarters of declining GDP and many expect Wednesday's report to provide the first official confirmation of a slide."
Well, case closed.
Yes, economists generally define a recession as two or more consecutive quarters of negative economic growth. The National Bureau of Economic Research (NBER), the nonpartisan organization the government uses to determine economic cycles, defines a recession as a period of sustained negative economic growth -- with GDP its most important variable.
Have we had a period of "sustained negative economic growth" since the end of the 2001 recession? No.
Last week, the government released two important figures: GDP growth (or lack thereof) for the first quarter of this year, and the number of jobs created (or lack thereof) for the month of April. Now, let's examine the reporting the day before and the day of the released figures.
The day before the released GDP report, a headline in USA Today read, "USA TODAY survey: We're in a recession, economists say." The first two sentences read as follows: "The U.S. economy is in recession, or soon to be in one. … Two-thirds of the 52 economists polled said the U.S. economy is in recession."
This USA Today we're-in-a-recession story showed a graph with the 52 economists' predictions. They (incorrectly) predicted 0.1 percent economic growth for the first quarter, 0.5 percent negative growth for the second, with positive growth for the next four quarters at 2.3, 2.0, 2.2 and 2.6 percent respectively. But they never bothered to show the growth in the last quarter of 2007, while anemic, was still a positive 0.6 percent. In other words, assuming the traditional definition of recession -- back-to-back quarters of negative economic growth -- even USA Today's economic experts were not truly predicting a recession.