Is the USA in recession?

[Hygro]

I think some of it is simply political, going both ways.

The bank wants to be relevant. They believe they have 3 tools, one is "forward expectations" aka the other side of the coin of "confidence", so they pretend to have all mighty power. They need a lot of trappings of policy power which they get through real responsibilities / real institutional power that basically help other parts of government, industry, and academia. That help being knowledge, data, and analysis / recommendations.

But the other side is who else is the government going to privilege with this collection? Can't be the universities. In the US we have two other options: the treasury, and the IRS / tax collectors. The treasury is going to change with parties every 4-8 years so that's way too volatile. The IRS is frequently under attack politically and similarly volatile. Better to give it to the fingerquotes INDEPENDENT /fingerquotes agency that's "private" and embedded in the foundation of capital, the banking system.

 

[Hygro]

The left side is pre Keynes

What is a recession? What have recessions looked like in the past? - USAFacts

The Bureau of Economic Analysis announced negative GDP growth.

usafacts.org

 

[Hygro]

However according this this other methodology (bottom chart, the top should match the previous post), it's not as pronounced

https://www.nber.org/system/files/working_papers/w11157/w11157.pdf

 

[Birdjaguar]

Well, it seems likely that the current one will not be too long.

 

[Hygro]

Is there a current one? If we are going by total dollars, GDP isn't even down. It's when we subtract inflation GDP is down, but economic activity doesn't seem to be recessing.

We can compare the two below. The last couple legs on the rightmost part of the graph. The rest is to show what it looked like previous recessions and growth.

 

[Birdjaguar]

Only if we follow the "standard" definition. In an election year lots of folks will want to call it, not only a recession, but the worst one in over a decade!

 

[RobAnybody]

You're underselling it: "Many people, some of them the world's leading economists, are coming up to me & they say 'Sir, this is clearly The Worst Recession in the History of the World!'"

 

[Hygro]

Terrible recession, really the worst, doesn't even make the cut.

 

[Birdjaguar]

WSJ opinion piece today

Recession Fears May Not Pass GO
By Mark Skousen
How can the U.S. be in a recession when the number of jobs is growing at a healthy clip? According to the National Bureau of Economic Research, two consecutive quarters of declining real gross domestic product is enough for a recession. The Bureau of Economic Analysis (BEA) reported just that—real GDP declined at an annual rate of 1.6% in the first quarter and 0.9% in the second.

But a host of statistics suggest that the economy is still growing, not the least of which is last week’s robust jobs report and unemployment rate. While the Conference Board’s leading economic indicator suggests a mild recession may be on the way, it reports: “The coincident economic index which rose in June suggests the economy grew through the second quarter.” The BEA also produces a statistic called gross domestic income, which adds up wages, profits and other income. Theoretically it should align with GDP, but it no longer does. Real GDI rose 1.8% in the first quarter, and is expected to have risen slightly in the second quarter (the official number will be announced on Aug. 25). Economists have noted the unprecedented gap between GDP and GDI. The BEA uses different surveys to come up with GDI, but the growing gap can’t be explained by a statistical “discrepancy.”

In addition, the relatively new statistic gross output, or GO—which measures spending at all stages of production, including the supply chain—rose at an annual rate of 2% in real terms in the first quarter. Second- quarter GO won’t be released until Sept. 29.

Why is GO a better measure of the economy than GDP? Because GDP has a serious flaw— it leaves out the supply chain. It accounts for final output only, finished goods and services bought by consumers, business and government. Intermediate production—all the goods in process along the way—are ignored.

GDP is slumping, but there’s a better way to gauge the economy.

That means that GDP only measures about 44% of economic activity. According to the BEA, intermediate production amounted to $19.5 trillion in the past year, compared with $24.8 trillion GDP. For technical reasons, that former figure leaves out an additional $11 trillion of wholesale and retail trade. For several years, I’ve championed GO as the “top line” in national income accounting and a better snapshot of the economy. Many economists consider it a better, more comprehensive measure than GDP. The biggest drawback is the BEA’s delays in releasing GO two months after the initial estimates of GDP. For decades, publicly traded companies have released their earnings reports every quarter, reporting sales (top line) and earnings (bottom line) at the same time. The federal government should do the same. It’s time national income accounting caught up with the accounting profession.

Mr. Skousen holds a chair in free enterprise at Chapman University and is editor of Forecasts & Strategies and author of “The Structure of Production.”

 

[Samson]

Why is GO a better measure of the economy than GDP? Because GDP has a serious flaw— it leaves out the supply chain. It accounts for final output only, finished goods and services bought by consumers, business and government. Intermediate production—all the goods in process along the way—are ignored.

What does this really mean? Say the supply chain looks like:

• Alice designs a widget, gets $10 per item for the patent
• Bob builds the circuit board, gets $10 per item
• Charlie puts it in a box and markets it, gets $10 per item
• Dawn sells it in a shop for $40, gets $10 per item

GDP only looks at the final product, and counts it as $40. GO looks at the supply chain and sees 4 * $10, which is the same? It kind of does not matter what those numbers are, they are all about getting that eventual $40 however they are distributed. If they add up to more than the item was sold for someone lost money, and that is exactly negative of making a profit in the supply chain so should be counted negatively.

 

[Farm Boy]

Not if you're the sort of ***hole that supply chain costs get "passed on" to. The numberlords lie.

Everything at retail, then everything at wholesale, and the freight both ways. Right? Who was that said that again? I'm starting to wonder if everything in Eastern Europe needs a different lens. Everytime somebody is "getting ****ed" they have newer tractors than we do. And we're paying to fight who? Just... curious. Not sure the lens is actually focusing.

 

[Samson]

Newer tractors probably means more heavily indebted, right?

 

[Farm Boy]

It can. But why would you assume older ones don't?

 

[Samson]

It can. But why would you assume older ones don't?

Had more time to pay down the debt?

 

[Farm Boy]

With what resources, using the older? Are they stupid, to have used the lesser generators?

The efficiency of consumption is somehow magically overriding the efficiency of capital, suddenly? Here?

 

[Samson]

The resources that they bought the kit to exploit. Land principally.

I certainly could be wrong, and individual circumstances will of course vary. I would have thought that there is a positive correlation between value of kit and debt burden.

 

[Hygro]

Q3 reported huge growth. But that's not why I'm here.

Turns out Q1 and Q2 had positive GDI numbers. This is very important in relation to the "They changed the definition!!!" crowd/narrative.

GDP, Gross Domestic Product, is a total measure of all final goods and services sold. GDI, Gross Domestic Income, is a total measure of all incomes that year, which in its fully accounting is dollar per dollar exactly the same as GDP. It's taking the same exact money total and dividing it into somewhat different categories.

However, the tools to measure GDP and GDI are slightly different. Both are noisy, a little inaccurate, and subject to revision. As such, they diverge by, in some years, upward of a couple hundred billion dollars.

The 2008 and 2020 recessions are both the two most recent and two most opposite recessions in recent history, other than both were big. 2008 being like a super 2000, all finance caused. 2020 was caused materially, and despite being the most extremely obvious and one of the biggest American recessions ever at its trough, doesn't even register on most peoples' radars.

However both were the same in that the difference between GDI and GDP was that GDI was below GDP. Same with the early 90s recession. The 2000's one is a bit weirder since it was declared without 2 consecutive quarters and was very mild in non-distributive terms.

In the not-recession of 2022, the one many weirdos are saying is ongoing when it hasn't started (yet? ever?*), GDI was above GDP, and as of right now, was positive one of those quarters. As I said, these noisy stats are subject to revision, and when I was making this post, it was from seeing the numbers a few weeks ago, where they were different enough such that GDI was positive both quarters. But I just checked. And that's really the point of this thread.

The fact that these numbers can even diverge is why we can't rely on them to define a recession. If we could, we could declare recessions with just one quarter, or one week, or one day, or even declare the economy goes into recession at night and grows in the day. Instead it's like (/me spends a couple hours) of the 45 negative quarters, only 30 of them were recessions. There were also 12 of the 206 positive GDP quarters in recession. This is slightly inexact because I counted "shaded areas" by hand and the start and end with the shaded areas sometimes was on, and sometimes between points, but it should be correct.

Just going by negative quarters, a ~67% chance of predicting a recession by a single negative quarter is pretty bad, but between two adjacent ones, .33 * .33 is about 0.11. This simplified way of looking at it means that 2 consecutive quarters of GDP only predicts a recession ~90% of the time.

Now I went and spent a bit more time, so here's the numbers, there's a one or two 3 in a rows I've collapsed into 2 since it's the same point.

Total recessions: 12
Total negative double+ quarters: 12
Double negative quarters no recession: 2
Recession containing at least 2 negative quarters in the official recession: 8
Recessions containing a leading or trailing double negative outside the recession (this one is weird to me): 2
Recessions containing no consecutive negative quarters: 2

Which leaves:
Recessions have been declared on top of double+ negatives 8 out of 12.
Double+ negatives have correlated to a recession 10 out of 12.
No recession was declared without more than one negative quarter within three quarters. (Accounts the other two).










* Would a 2023-2025 start to a recession be the same thing? if so, why not call it the same as the 2020 one?

 

[Birdjaguar]

US GDP change for last 12 months:
2021: 4Q +7%
2022: 1Q -1.6%
2022: 2Q -0.6 %
2022; 3Q +2.9%

So technically, we were/are in a recession. Currently, 8* of the 50 states have an unemployment rate of over 4.2%. The national rate is 3.7%

States over 4.2%: NY, NM, IL, MD, DE, NV, AK, CT

 

[Hygro]

US GDP change for last 12 months:
2021: 4Q +7%
2022: 1Q -1.6%
2022: 2Q -0.6 %
2022; 3Q +2.9%

So technically, we were/are in a recession. Currently, 8* of the 50 states have an unemployment rate of over 4.2%. The national rate is 3.7%

States over 4.2%: NY, NM, IL, MD, DE, NV, AK, CT

My entire previous post is explaining that 2 quarters of GDP shrinkage does not define a recession. Literally that is the entire post.

 

[Birdjaguar]

My entire previous post is explaining that 2 quarters of GDP shrinkage does not define a recession. Literally that is the entire post.

I know that but the traditional definition says differently. I like your explanation better. I just wanted to put the typical key data points out there.