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Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35392  
Subject: Re: Implications of Fed pause Date: 8/11/2006 12:05 PM
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bruce,

If we use strict definitions the economy is still growing and thus not in recession. This may not be true for all regions or communities, in an economy and nation this large it is possible to have a localized recession that is a drag on the national numbers but the national numbers still indicate growth. IIRC California is the worlds 6th or 7th largest economy.

Wikipedia gives us
In contrast to popular belief, a recession is not correctly defined as a drop in a country's real Gross Domestic Product (GDP) for two or more successive quarters. Rather, it is a period of simultaneous declines in coincident measures of overall economic activity such as output, income, employment and sales. In fact, the 2001 U.S.

By this measure, nationaly, we aren't in recession. Output, measured by GDP is still increasing, employment is steady and sales continue to tick along. The muddiest area is income; income is lagging price appreciation and GDP but growing.

Where waters get muddy is on the inflation/price appreciation vs. growth realm. If prices are appreciating faster then national or regional growth the impact felt on the personal level is recessionary. One can think of it in heat index or wind chill terms. The themometer may indicate a temprature but how it affects us is more dramatic then the raw number would indicate.

This leaves us with wrangling over terms like "decline" and "real or relative decline". If growth slows from 4.5% to 3.5% is that a decline or a real decline? If price appreciation is 5% and income growth is 1% is that a decline or a real decline?

NBER the official private entity that designates and dates recessions and expansions offers us this The period from a peak to a trough is a recession and the period from a trough to a peak is an expansion.
http://www.nber.org/cycles/recessions.html

Intersting historical data
http://www.nber.org/cycles.html/

Some interesting charts
http://bigpicture.typepad.com/comments/2004/08/chart_of_the_we.html

http://www.steeleanalytics.com/economy.htm#RANGE!A61

We have to go back to 1991 to see a negative GDP number. Our last recession, March 2001, was a fall from 4.5 to .8 but .8 is still positive growth. There were several dips prior to that fall, one of which helped George H. Bush lose an election but was never officially a recession. The year over year annual change GDP numbers for both 91 and 01 are definatively negative but once again the 92 number was also a steep decline yet not an official recession.

This leaves us with official definitions and data and our personal interpretations of that data or more importantly our impressions of the underlying economic conditions that are reflected by the official data. Our experiance precedes the data and our expriances are biased by thousands of factors, which is true? Eastern mystics tell us there are three equal truths: your truth, my truth and the truth.

jack
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