Dallas Fed: U.S. Likely Didn’t Slip into Recession in Early 2022 Despite Negative GDP Growth

[femalove]

@lalagata It's too much to ask people to read. A lot of people over 50 don't like reading.

 

[resjudicata]

@joyjoy1001 I mean, you should read the article and then comment on it to start off.

This reads like you didn't at all and then maybe did a bit after someone replied to you... This is how the comments don't reflect the actual content and people just bickering about what ever.

 

[trannamcomputer]

@lalagata The low employment combined with negative real GDP in the context of higher inflation implies to me that the problem is lack of labor. This economy has too much to do and not enough workers.

 

[samanthaanastasia]

@lalagata It’s not partisan. But you can tell when people are trying to make it partisan.

 

[jbloggs]

@lalagata Whatever they want to call recession at the end of the day people feel like they are in a recession and will adjust their spending accordingly. Hell Biden or Powell can even say we are in an economic boom people would still do what they feel like.

And 50% rise in cost of living in the last 2 years doesn't feel like economic boom but more like economic burden

 

[aravis85]

@lalagata It's written in stone that the top post will always be some unhelpful, smug, snarky nonsense though, so here we are. There's nothing 'partisan' about the word recession at all, in fact it has a technical definition.

 

[benjaminhu]

@joyjoy1001 Not arbitrary.

 

[willm]

@joyjoy1001 Call it a recession or not, but fed's actions seems to be working. Economy is cooling, gas prices are dropping (under $4 in my city today), housing prices dropping, while job growth continues. Whatever you call it, it seems to be exactly what we need. If this "recession" means lower housing prices without losing my job, then I'm all for it. I'm cautiously optimistic that the fed is actually going to hit it's "soft landing" and set us up for renewed growth in 2023-2024.

 

[swissmiss2584]

@joyjoy1001 The definition wasn't always so "arbitrary", that's the issue.

 

[mistamaniac3000]

@joyjoy1001 That other thread wasn't partisan. It was a group of people who understand economics trying tell a group who doesn't that this isn't a partisan issue. Your comments indicate, unfortunately, that you fall into the latter group.

 

[resjudicata]

@lalagata Take THAT recession!

 

[susanna12345]

@lalagata I’m sorry but your whole point about low unemployment rate may be a little irrelevant. Look at the unemployment rate and this ALMOST always spikes AFTER a recession has occurred. It’s a lagging indicator essentially.

 

[lalagata]

@susanna12345 This misconception would be forgivable, if the above linked article doesn’t specifically cite a paper discussing unemployment trends during recessions. Please go read the paragraph again, then the cited source, because you’re grossly misinterpreting a fairly straightforward data point.

Specifically page 8 here:

Panel (b) of Figure 2 shows the estimated
recession probabilities averaged across two-regime models for each of the three variables that arguably receive the most attention in both academic and popular discussions of short-run fluctuations—real GDP growth, employment growth, and the change in the unemployment rate.4 The models using either employment or the unemployment rate yield the same two key results as the model using GDP: the two regimes look like recessions and expansions, and the periods the model assigns high recession probabilities to overlap closely with NBER recessions. Indeed, the correspondence to the NBER recession dates from averaging the three sets of estimates is even closer than that using GDP alone. Of course there are differences (an issue we discuss below), but the overall fit is remarkable.

Effectively, overlaying sharp upward trends in unemployment combined with GDP shows significant overlap with actual business cycle contractions. Unemployment has done the exact opposite through the first two quarters. Claims have shifted slightly upwards, but certainly not definitively enough to ignore the larger shift downward in unemployment, a trend completely at odds with historic unemployment behavior in contractions.

 

[texaschristianhusband]

@lalagata You’re the best

 

[jbloggs]

@lalagata denial => This is not a recession

anger => Censor online "disinformation"

bargaining => "Ok but this recession is only temporary"

depression => "Biden Mumbles words end of quote leaves the room without answers"

acceptance => "Recession is only at 8% "

 

[ferero]

@jbloggs Downvotes are coming but this one is a classic

 

[resjudicata]

@lalagata Paul Krugman had an interesting piece a week or so ago which points to the complexity of the topic. (https://www.nytimes.com/2022/07/26/opinion/recession-gdp-economy-nber.html)

A seminal 1913 book by the American economist Wesley Clair Mitchell is widely credited with beginning the systematic empirical study of business cycles. In 1920, Mitchell helped found the National Bureau of Economic Research, an independent organization that soon found itself devoting much of its research to economic fluctuations, and began offering a chronology of business cycles in 1929.

Since 1978 the N.B.E.R. has had a standing group of experts called the Business Cycle Dating Committee, which decides — with a lag — when a recession began and ended based on multiple criteria, including employment, industrial production and so on. And the U.S. government accepts those rulings. So the official definition of a recession is that it is a period that the committee has declared a recession; it’s an expert judgment call, not a formula. (Emphasis mine)

So where did the two-quarter thing come from? Part of the answer is that the N.B.E.R. doesn’t make recession calls in real time. For example, while the Great Recession is now considered to have begun in December 2007, the dating committee didn’t make that call until December 2008. Also, other nations don’t have any equivalent of the N.B.E.R. So there has always been an incentive to look for simple formulas, not dependent on judgment, that can quickly determine a recession.

It's never been a rule of thumb, its more like "If we had two quarters of growth slowing, we may be in a recession" and that gets truncated by finance bros who may or may not have spent much time learning the subject matter.

He Continues:

There are better indicators. The Sahm Rule, developed by Claudia Sahm, a former Fed economist currently at the Jain Family Institute, tries to identify the start of recessions by looking for significant increases in the unemployment rate.

I'd suggest in the view of the aggregate supply curve and all of its miraculous problems, this is maybe a better indicator.

 

[lalagata]

@resjudicata The two quarter thing is the Christopher Columbus of economics. It’s never really been true, everyone who studied the field knew it wasn’t true, but because education systems are substandard and people generally take to simplicity over nuance we get a widespread misconception.

I’m sure if you asked every historian in the country who discovered the new world you’d get answers that did not involve Columbus. But if you survey the average American you’d likely see 80-90% leaning towards Columbus. The two consecutive quarters of negative GDP is really no different.

 

[resjudicata]

@lalagata Except that what the masses think is true because of 20-something-edgy-finance reddit and tiktok, tends to prevail in narrative. It's like tax cuts increasing jobs and other hot takes that most people take as true.

I think the good news is that its not self-perpetuating (like Inflation may be) and may be less harmful than other misperceptions.

 

[trueservant]

@resjudicata There’s a certain other sub I had to unsub from because it just came lazy memes about whether or not we are in a recession. Yawn.