On the definition of “recession”

Sick of hearing about it, or waiting until after the fact

Mark Hopkins of Mashable does a pretty good job of railing against the pundits here. And his definition of recession is certainly correct – two successive quarters of GDP decline. However, I believe that a lot of the chatter being heard is a reflection of the speed in which information is now flowing, and those in the middle’s desire to define the state the economy is in before the government releases GDP figures for two quarters in succession.

Ask yourself these questions: If the US does experience two quarters of successive GDP decline, are you in recession on the first day of the first quarter of that decline? And if the quarter subsequent to the previous two shows growth, are you out of recession on the first day of that?

Under the above circumstances, and using the word “recession” in its strictly defined manner, the only thing a person would ever be able to say is…”We were in a recession.”

By then, the fun would be over.

UPDATE: Via Forbes:

Surprising new GDP numbers show the economy is growing, albeit slowly. Your move, Ben.

Maybe that should be “Surprising new GDP numbers show the economy was growing, and nominally.” Of course, you can still throw in the “your move, Ben” part, because it seems that with a stagnating economy and skyrocketing prices for staples, the Fed Chairman has few moves left.

UPDATE 2: Aptly put (emphasis mine):

The Bureau of Economic Analysis reports that the U.S. economy grew at a 0.6% annual real rate in Q1 2008, mostly because of a buildup in inventories. Without the unwanted buildup in inventory, GDP would have been negative, suggesting the economy is in recession.