Forgive my ignorance here, but isn't it simply better for the economy to have low rather than high unemployment? And since a recession is basically "the economy is doing bad" doesn't that mean that the unemployment argument is: "it may be doing bad, but not /that/ bad". And then the discussion is if the economy is doing bad enough to call it a recession, people point to low unemployment and say: no.
There is a lot going on in this question, so I apologize if my answer doesn't address.
It really comes down to what you mean by "better for the economy". When most people care about the economy, what they really care about is how much "stuff" they or the average person can buy.
To one extreme, many people would still be unhappy if the GDP and "economy" doubled, but only 10% of people were working. Either 90% of people would be going without, or they would be on some sort of welfare taxed from the 10%.
To the other extreme, many people would be unhappy if there were 100% employment, but all you could buy with it is a loaf of bread.
The ideal is to have high labor demand (usually associated with high employment) and growing GDP.
This means that people who want to work can easily get a job, and the amount of "stuff" they can get from working keeps going up.
The unemployment rate is a good proxy for a person's ability to get a better job, and that is an undeniable good. Restaurants are having trouble hiring people because most of those jobs are awful. Employers who treat their employees well aren't having retention problems.
Exactly this, hit the nail on the head. If anyone thinks this isn't all happening because US mid-terms are coming up, they are delusional or lying to themselves.
I had an insight last night about inflation, and why it's not what we're experiencing today. Prices on convenience and entertainment have roughly doubled since the pandemic where I live. A cocktail was $7 in 2019, today it's more like $13. Milk at the gas station was as low as $3.50 but is now $5. Food delivery charges are ridiculous and unsustainable, but hey at least the services exist.
High prices open the door to competition. Anyone can mix a cocktail for less than $13. Anyone can come up with a better way to deliver food or start a food truck.
So the price gouging "inflation" we see today from corporations and established businesses leaves them vulnerable. If the economy really tanks and commercial real estate becomes worthless as projected, there's going to be so much entrepreneurship, just like in the early 2010s after the Housing Bubble popped. Not only that, but people are hyper-aware of stuff like rent seeking now, so may even buy out their landlords, form co-ops, avoid having an employer or standard work hours, basically do all of the things that should have probably happened 20 years ago after the Dot Bomb. But we got distracted by the War on Terror, which is transitioning to the War on Authoritarianism as people wake up.
If Wall Street tanks, that will be better for Main Street. Having spent my entire adult working life barely surviving, I just don't care if established players go bust. This is a B.S. economy where maybe 3-10% of the population does any real work (like growing food) and everyone else takes whatever menial service job they can get or skims money off their employees. It's a joke. Anyone could do a better job managing the economy if we would ever do the most obvious things like tax the rich.
> If the economy really tanks and commercial real estate becomes worthless as projected, there's going to be so much entrepreneurship
Entrepreneurship always ramps up during the hard times. People lose their jobs and are forced to get scrappy.
> High prices open the door to competition. Anyone can mix a cocktail for less than $13.
Consumers became desensitized to price increases during the pandemic supply shortages. Right now, there's strong evidence to suggest that many businesses are simply raising prices because they can get away with it. If you're running a business, you have a once in a lifetime opportunity to jack up prices without harming your brand - you can just shrug and blame the abstract specter of "inflation" and your customer base directs their frustration toward some political entity instead of you.
In the short-term it's a no-brainer; especially when everyone around you is doing it. But in the medium-to-long-term, you're 100% correct that it leave you vulnerable to being undercut by new entrants to the market.
The current go-to arguments for not being in a recession are low unemployment and high inflation, however those have historically been lagging indicators that start moving somewhere in the middle of a recession.
So I'd say if we're not in a recession right now, we're on the edge of one. There have been so many economic shocks all at once I don't see how we pull out into positive growth without some serious retooling, and it'll take a recession to provide the necessary motivation/political cover to kickstart said retooling.
> There's never been any "I think" in all the recessions I've experienced. Everyone knew.
The Great Recession even being a recession was debated from before it was later declared to have started until it was officially declared a year after the point it was declared to have begun (which was actually before the revisions to GDP figures which would qualify the starting point as a recession under the 2-down-quarter rule that some people are now pretending is Holy Writ.)
So, either your memory is flawed or your experience is quite limited.
Well surely at the start it was I think before developing into I know. Right? Plus plenty of folks are already at I know right now while some are at I think or I know were not.
The Fed was basically announcing that they're going to cause a recession that everyone will agree on in order to get inflation down.
They've largely shut up talking in the press which has allowed the markets to rebound a bit (which will allow the rich to unwind some positions).
But the problem with inflation that we're seeing right now is that it goes beyond just an increase in oil prices, the leveling off of oil prices will not be enough to get it under control, and the Fed's stated goal of 2% inflation targets will require rising unemployment. And the Fed basically told everyone that this is what needed to happen when they were talking about focusing on core CPI instead of just oil, and talking about holding interest rates above the natural rate for some time, along with their statements that the labor market remains historically strong.
I can't quite predict when that will happen, but we're certainly not there yet.
We should also see the entire rest of the real economy get stress tested, and you can easily bet that since the last time it was tested was 2008 we'll see detonations in something else. My bet is commercial real estate goes off first due to the combined effects of the pandemic, remote work, and the recession.
There's still a lot of "work" left to be done to get into a recession. The yield curve needs to invert for a sustained amount of time, unemployment should spike and I expect it hits around 8%[*], the Fed will realize they've gone too far and start slashing rates again. We'll be talking about bailing out rich people again.
Whatever you think about how bad this is, the actual recession is going to be 10 times worse, and most of the arguments about how horrible the current economic conditions are I think can be summed up as "tell me you were too young to really remember how bad 2008 was without telling me". And this time could very well be worse than 2008. We've had even longer to build up problems in the economy (and we did basically fuck-all about regulating the banks last time) along with the fact that if the Republicans take the House they'll likely be happy to ruin the economy to hang it on Biden (probably up until the Billionaire class starts to actually hurt and yells at enough of them to knock it off).
Right now it looks like we're heading for a second half recovery in sentiment though and I don't really expect any of this to unfold until next year after higher interest rates have had time to take effect. Although towards the end of this year Wall St may start to realize that core CPI isn't coming down even though oil levels off and that interest rates will still go up, and they'll start to more accurately predict how much pain we're in for. Right now it seems like the prevailing sentiment is that the Fed has largely done their job, rates won't go up much longer and that inflation is tamed because oil leveled off, so we just had the weakest recession possible which tamed all our inflation and its back to boom times--I am extraordinarily skeptical of that take.
For me, the argument about the technicalities of what makes a recession bothers me much, much less than the smugness of a general group of the intelligentsia who once conveniently anointed themselves "fact-checkers" that are trying to handwave away the idea of a recession in spite of historical definitions that we've never strayed away from.
We really ought to resist bulls*t like this. One can simultaneously believe that people should get vaccinated, that Trump is an embarrassment of a person and leader, that news has stopped being news for at least 15 years, and that the "but actually it's not a recession because.." elite of this country don't care about truth but, instead, power.
This is published on a Japanese newspaper but it was written by a Harvard prof:
> Robert J. Barro, professor of economics at Harvard University, is a visiting scholar at the American Enterprise Institute and a research associate at the National Bureau of Economic Research [NBER].
What's kind of weird is that he points out that NBER (the group that, turns out, he works at) needs to be the one to officially "pronounce" it a recession.
So he went public to say this despite the public group he works for not (yet) agreeing?
Is he saying this in an official capacity as an NBER research associate or this is just his unrelated personal opinion?
I think is just providing some basic information and providing his opinion. For example, he clarifies that the NBER waits on average 7 months to declare a recession,and is essentially a retrospective assessment. However, it has never failed to declare a recession after two quarters GDP loss since WWII
Politics aside, as a non-native speaker this makes me think of the word "likely". If you use it, just how likely is the event that you apply it to? Is it equivalent to "probably", or to "possibly"? In German we have "wahrscheinlich", which is the same as "probably" (and "Wahrscheinlichkeit", "probability" and "likelihood" are synonyms), so that would mean "likely" is the same as "probably"?
There is another possibility: stating something as a fact could have legal implications (especially if it isn't "true"), but stating an opinion is often fine. So, I would read this as "Our opinion is the U.S. economy is in a recession (not a fact)", despite the article trying to convince you. It even finishes off with
> "we can be highly confident that the U.S. economy entered a recession early in 2022."
which is stronger than "likely", but still shy of saying that it is so.
In this title I feel like the word "likely" is a bit inappropriate and "probably" would make more sense. "Likely" implies a bit more.. probabilistic reasoning, whereas gauging a recession is more a question of how you define it. But here, I guess, it's just being used as a slightly more professional way to say "probably", and should be taken to mean exactly the same thing in this case.
Yes, this usage is basically "wahrscheinlich". Here it is a rhetorical device to soften the author's conclusion:
> The bottom line is that, with the announcement on July 28 of a two-quarter GDP decline, we can be highly confident that the U.S. economy entered a recession early in 2022.
This will usually be the case. When something is likely X it is probably X, not possibly X.
Readit News
This is like saying sure you can't buy as much bread, but at least you are working longer.
The fact that more people are working to produce less than before describes an economy in decline.
Working more or longer isn't a good thing in its own right. In fact, it is bad it you are working more for less purchasing power.
Employment growth has historically been associated with increased purchasing power, but the current situation is a deviation from this norm.
Talking about employment growth ignoring this fact is a bit of a bait and switch playing on this incorrect association.
It really comes down to what you mean by "better for the economy". When most people care about the economy, what they really care about is how much "stuff" they or the average person can buy.
To one extreme, many people would still be unhappy if the GDP and "economy" doubled, but only 10% of people were working. Either 90% of people would be going without, or they would be on some sort of welfare taxed from the 10%.
To the other extreme, many people would be unhappy if there were 100% employment, but all you could buy with it is a loaf of bread.
The ideal is to have high labor demand (usually associated with high employment) and growing GDP. This means that people who want to work can easily get a job, and the amount of "stuff" they can get from working keeps going up.
However, it is bad if 2 people have to work for the same income that one person made before.
Employment has gone up 1% but inflation adjusted wages have gone down ~10%.
High prices open the door to competition. Anyone can mix a cocktail for less than $13. Anyone can come up with a better way to deliver food or start a food truck.
So the price gouging "inflation" we see today from corporations and established businesses leaves them vulnerable. If the economy really tanks and commercial real estate becomes worthless as projected, there's going to be so much entrepreneurship, just like in the early 2010s after the Housing Bubble popped. Not only that, but people are hyper-aware of stuff like rent seeking now, so may even buy out their landlords, form co-ops, avoid having an employer or standard work hours, basically do all of the things that should have probably happened 20 years ago after the Dot Bomb. But we got distracted by the War on Terror, which is transitioning to the War on Authoritarianism as people wake up.
If Wall Street tanks, that will be better for Main Street. Having spent my entire adult working life barely surviving, I just don't care if established players go bust. This is a B.S. economy where maybe 3-10% of the population does any real work (like growing food) and everyone else takes whatever menial service job they can get or skims money off their employees. It's a joke. Anyone could do a better job managing the economy if we would ever do the most obvious things like tax the rich.
Entrepreneurship always ramps up during the hard times. People lose their jobs and are forced to get scrappy.
> High prices open the door to competition. Anyone can mix a cocktail for less than $13.
Consumers became desensitized to price increases during the pandemic supply shortages. Right now, there's strong evidence to suggest that many businesses are simply raising prices because they can get away with it. If you're running a business, you have a once in a lifetime opportunity to jack up prices without harming your brand - you can just shrug and blame the abstract specter of "inflation" and your customer base directs their frustration toward some political entity instead of you.
In the short-term it's a no-brainer; especially when everyone around you is doing it. But in the medium-to-long-term, you're 100% correct that it leave you vulnerable to being undercut by new entrants to the market.
So I'd say if we're not in a recession right now, we're on the edge of one. There have been so many economic shocks all at once I don't see how we pull out into positive growth without some serious retooling, and it'll take a recession to provide the necessary motivation/political cover to kickstart said retooling.
Recessions happen fast. There's never been any "I think" in all the recessions I've experienced. Everyone knew.
The Great Recession even being a recession was debated from before it was later declared to have started until it was officially declared a year after the point it was declared to have begun (which was actually before the revisions to GDP figures which would qualify the starting point as a recession under the 2-down-quarter rule that some people are now pretending is Holy Writ.)
So, either your memory is flawed or your experience is quite limited.
See another commenter’s chart here: https://fred.stlouisfed.org/series/GDPC1
If you are a low earner and your cost of food goes up 10% you know it.
If you are a high earner, you can play semantics.
They've largely shut up talking in the press which has allowed the markets to rebound a bit (which will allow the rich to unwind some positions).
But the problem with inflation that we're seeing right now is that it goes beyond just an increase in oil prices, the leveling off of oil prices will not be enough to get it under control, and the Fed's stated goal of 2% inflation targets will require rising unemployment. And the Fed basically told everyone that this is what needed to happen when they were talking about focusing on core CPI instead of just oil, and talking about holding interest rates above the natural rate for some time, along with their statements that the labor market remains historically strong.
I can't quite predict when that will happen, but we're certainly not there yet.
We should also see the entire rest of the real economy get stress tested, and you can easily bet that since the last time it was tested was 2008 we'll see detonations in something else. My bet is commercial real estate goes off first due to the combined effects of the pandemic, remote work, and the recession.
There's still a lot of "work" left to be done to get into a recession. The yield curve needs to invert for a sustained amount of time, unemployment should spike and I expect it hits around 8%[*], the Fed will realize they've gone too far and start slashing rates again. We'll be talking about bailing out rich people again.
Whatever you think about how bad this is, the actual recession is going to be 10 times worse, and most of the arguments about how horrible the current economic conditions are I think can be summed up as "tell me you were too young to really remember how bad 2008 was without telling me". And this time could very well be worse than 2008. We've had even longer to build up problems in the economy (and we did basically fuck-all about regulating the banks last time) along with the fact that if the Republicans take the House they'll likely be happy to ruin the economy to hang it on Biden (probably up until the Billionaire class starts to actually hurt and yells at enough of them to knock it off).
Right now it looks like we're heading for a second half recovery in sentiment though and I don't really expect any of this to unfold until next year after higher interest rates have had time to take effect. Although towards the end of this year Wall St may start to realize that core CPI isn't coming down even though oil levels off and that interest rates will still go up, and they'll start to more accurately predict how much pain we're in for. Right now it seems like the prevailing sentiment is that the Fed has largely done their job, rates won't go up much longer and that inflation is tamed because oil leveled off, so we just had the weakest recession possible which tamed all our inflation and its back to boom times--I am extraordinarily skeptical of that take.
[*] at a minimum
We really ought to resist bulls*t like this. One can simultaneously believe that people should get vaccinated, that Trump is an embarrassment of a person and leader, that news has stopped being news for at least 15 years, and that the "but actually it's not a recession because.." elite of this country don't care about truth but, instead, power.
> Robert J. Barro, professor of economics at Harvard University, is a visiting scholar at the American Enterprise Institute and a research associate at the National Bureau of Economic Research [NBER].
What's kind of weird is that he points out that NBER (the group that, turns out, he works at) needs to be the one to officially "pronounce" it a recession.
So he went public to say this despite the public group he works for not (yet) agreeing?
Is he saying this in an official capacity as an NBER research associate or this is just his unrelated personal opinion?
Deleted Comment
NBER states it is 'declined economic activity' leaving the door open for interpretation by many economists.
https://www.nber.org/research/business-cycle-dating
BEA (as referenced from the article):
https://www.bea.gov/news/blog/2022-07-28/gross-domestic-prod...
FRED chart, to give perspective that the real GDP dip is very slight:
https://fred.stlouisfed.org/series/GDPC1
Looking at it, except for 2008 it seems that the dip is mild (for example the 1970's oil crisis have a very mild slope).
True statements:
- We are likely in a recession
- We do not yet have numbers proving we are in a recession
- We have some numbers that show we're in a recession
- We have some numbers that show the recession didn't start in Q1
- If the numbers from Q3 are similar to the numbers in Q2 we will be in a recession by almost any definition
False statements, which neither side are saying:
- We have numbers proving we're in a recession
- We're not in a recession
> "we can be highly confident that the U.S. economy entered a recession early in 2022."
which is stronger than "likely", but still shy of saying that it is so.
> The bottom line is that, with the announcement on July 28 of a two-quarter GDP decline, we can be highly confident that the U.S. economy entered a recession early in 2022.
This will usually be the case. When something is likely X it is probably X, not possibly X.