Friday, August 14, 2009

Foxnews poo-poo-es on economy optimists

The only absolute truth is that the recession will eventually end. JPM are the optimists I've read thus far, and if you want to feel warm and fuzzy over the weekend, take their word - for now.

For Economists Declaring an End to the Recession, Some Signs Suggest 'Not So Fast' (notice it's under their politics section? political economic reportage)
Surging productivity. A drop in the unemployment rate for the first time in 15 months. And a forecast of growth in gross domestic product this quarter.

What recession?

That's what many economists are saying as they point to those signs as evidence that the longest recession since the Great Depression has ended.

"Most economists who are saying the recession ended, what they mean is the economy will grow in the third quarter," Chris Varvares, president of Macroeconomic Advisers, told

But other data suggest those declarations may be premature.

First, before it can be determined whether a recession has ended, it's important to note how to define a recovery. According to the Economic Policy Institute, the economy must grow at least 3 to 3.5 percent to keep unemployment from rising and 4 to 4.5 percent for unemployment to drop 0.5 percent.

The National Bureau of Economic Research, the group charged with making the official calls, says on its Web site that it marks recovery from the date that it sees the economy hitting rock bottom. It looks at that trough through the lens of employment, personal income and growth in the gross domestic product.

However, the bureau doesn't make the call on a recovery until long after it began. For instance, the bureau did not announce the November 2001 end of recession until July 2003.

In July 2003, it wrote that the NBER did not conclude that in economic conditions since November 2001 "have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month."

The bureau's silence hasn't stopped economists from weighing in. Many believe the current recession is on the verge of ending. If the economy starts to grow in the second half of this year, companies are expected to switch from layoffs and trimming workers' hours to boosting employment as demand for their products increases.

Evidence showing that the recession is easing continued to emerge Friday. The Federal Reserve said production from the nation's factories, mines and utilities rose more than expected in July, with the first gain in nine months driven by increased output from auto companies.


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