Seems like a lot of people on Twitter think this is some sort of critical decision. I don't see how the NBER's classification should make any difference to 99% of people.
Well, I think it's fine. Since it matters so little whether we're "actually" in a recession according to *any* definition, I don't mind people arguing over whether the term applies.
Would all the people bending over backwards and trying to avoid using the term "recession" for the last two negative quarters of GDP growth be doing this if Trump was still president?
No, definately not. This is exactly what is wrong with Journalists, academics and economists. Their political bias pollutes their opinions and articles depending who is in charge.
Minor correction: "There are basically three notions of “recession” — I call them the official definition, the official definition, and the academic definition." I assume the second one is supposed the be the fok definition?
Take all 3 definitions. Now, when you are trying to work out whether unemployment is going to be materially higher a year from now, does it matter which definition you use? Not unless you care about relitigating the past. I think we are losing the woods for the trees here. All because we dont want to have to admit we are in a recession during an election year. So fine, call it an "inventory recession", it won't change the implications for the future...
Yeah, regardless of your politics, this article seems a real macroeconomic stretch. And the entire debate continues to obsess over definitions applied to a backward looking indicator, while ignorning the implications slower GDP has for everything from rents to incomes to inflation to unemployment. Outside of politics, a recession is neither here nor there. It is the consequences months or usually years down the track. But you guys enjoy yourself right now, ignoring time lags, spurious regressions and missing the entire point.
People like to say they are lagging indicators, consequences are years later, etc. That's BS.
Business sees these things and plan accordingly. They lay people off now, they cut back on spending and other things to position themselves to weather the coming troubled times.
The author's point is that he doesn't want Dems and Biden to take Carters place as the worst economy in the last 60 years
I'm not sure I would call an empirical fact BS. You say whatever sounds right to you, but common sense isn't a great tool when the data is so overwhelmingly clear. You also need to stop thinking in binary terms, yes, consumers cut back on spending when rates go up but not enough to bring down inflation or economic growth (at first). Some people do it immediately. But there are more influences on your decisions than just interest rates. For example, right now, a lot of consumer don't care about a 75 bps hike, what motivates their spending is the fact that their long desired TV is going to go up 10% in few months, so they want to buy it now. Etc. I get that you struggle to see the time lags if you get economic data from media stories, but look at the data. It is FREE, publicly available to anyone, heck you can look at it on your phone from bed (start with FRED is you are clueless, it is free and easy to use). Then tell me there is no lag....
I get the author's point. I am not addressing his political point. I really need you to focus on the arguments being made....
There has been quite a laugh in the uk at bidenomics trying to change from what you call the folk definition of a technical recession. 38 attempts at amendments of the definition in wiki occurred over the last 3 days. Pure trolling going on. Also the media were trailing it and some notable economists in advance. All to take the heat of biden.
Soon like Argentina in the past they'll fake inflation. I dont know if they would have the nerve to omit printing them. As you say it is politics but basically the left in the usa have become fundamentally dishonest. If it had been a republican they would have used the folk definition. But nber is just kicking the can down the road.
All for a backward looking indicator. Let's put it this way, what matters is the implications of a recession for the future. The important things like unemployment, inflation, trade deficits, public debt, housing prices, etc. All of these are impacted by a slowdown. Does anyone dispute we are in a slowdown? Does anyone doubt the extent of the slowdown will have a material impact on those key variables? And does anyone doubt that there are long time lags from these slowdowns to these other key variables? So why do you care about the definition of a recession? I mean, other than politics.
Well, technically for a quarter maybe but there was never annual GDP growth of 6%. But more importantly, do you give the President credit for growth? How about congress? the Fed? Even if you believe in your heart of hearts that Presidents deserve 100% of the credit/blame for economic outcomes during their tenure, does that mean you switch votes depending on which President happened to be in office when the Fed or Congress did stoopid stuff? It is a two edged sword.
Well thats fine? Another blurb to protect Biden and his policies. It would be fine if we did go from 6% growth under Trump to a recession under Biden in a couple of years.
Not protecting Biden or Trump. Just saying you dont want to give the president (of any party) all the credit or all the blame. I mean, have you heard of Fed independence? Also, Trump had a recession and he NEVER had 6% growth. Trump talked about wanting 6% growth and maybe you are getting confused by that. The data is free and publicly available so you can tell yourself whatever you want. Some of us aren't here to lobby for a politician (of any persuasion). But if you say economic dribble then people, even those who agree with your politics, will call you out on it.
Again, you can get GDP data for free on your phone while sitting on the toilet. There is no reason to be this uninformed or bad at math. Google FRED gdp. It is basic algebra. If you don't want to look at the data, or you want to cherry pick the most recent quarter of growth, I can't help you. Good luck, you guys don't seem to care whether your info is accurate 👍
This is nothing other than a campaign ad for the Democrats and is intellectually dishonest. This is the first time in my 7 decades on the planet that a broad base of people - and ALL OF THEM from the left - decided that the definition of a recession is something different than two quarters for negative growth. Never happened before. Certainly not in 1992 (and I might add, that recession then was over by Election Day but announced by the deep state afterwards). Remember - “it’s the economy stupid”?
No one with one eye open can’t see that this economy is in terrible shape. That’s why the left is going through wind mill action to get rid of the R word and, like the border lie a blue streak. Oh yes, the border is secure. Secure enough for 3 million illegals to sneak in this year. Oh, no, there’s no recession and things are peachy. They still count as their achievement the “growth” in jobs and economic activity that was nothing other than the return to the status quo before they shut down the economy in 2020 when everyone lost their jobs and businesses were shut down. They know they’re lying. It’s astounding. But then again, who are you gonna believe - them,more your own lying eyes,.
How is your 7 decades of experience relevant? I mean, there are homeless drug addicts outside my home who are more experienced than that, but i tend to look for other criteria when it comes to analytical insights, like logic, data, facts, etc. The NBER isn't all from the left. Nor is the Fed. Nor is... oh why do we even bother
Right. Don’t bother. You are correct!!!!! It’s NOT the economy, stupid! Things are going just great! I feel wonderful eating a meal that cost 20% more than last year - that means it’s more valuable and I should feel swell about that, right? And gas prices? Pshaw! It just means getting there is all the more worthwhile. Murders on the rise? A great way to keep our social security costs down! Shoplifting on a major scale up? Spread the wealth!
I need to you to dig deep and focus on the item we are discussing. I never said ANY of those things. What i said is that the recession definition is agreed to by economists and politicians on both sides of the spectrum. You want to rant about who to vote for, go crazy, I don't care, but it is also not what we are discussing. Here is the thing about facts, you can check them on your phone while lying in bed. So there is no excuse to be this wilfully ignorant. Push your political views but try to get some basic facts correct.
Sure, Clinton sold us out to China for dirty campaign money and now look where they are. And look where OUR manufacturing base went. He tried to sell out Israeli for a Nobel to clean his dirty reputation. He let Bin Laden get away. Then his wife got escalated as a result of his presidency and he sold us out again, for dirty Foundation gifts I. Exchange for lots of our uranium reserves. How the two of them avoid jail is beyond me,
And by the way, your mother thinks I look like Fabio, which is why, like Philadelphia cream cheese, she’s so spreadable it’s incredible.
These people never say “a recession now would be fine” before one happens. Instead, corrupt media voices line up to defend yet another blow inflicted by the Democrats by telling us “it’s fine.” It’s not fine - not by a long shot. We shouldn’t let ourselves be fooled by media sycophants.
Ultimately, it doesn't matter. If there is a slowdown, call it what you want, voters care because of its implications for their jobs, housing prices, mopirtgage rates, inflation, etc. Whether an economy grows 0.1% or shrinks by (0.1)% doesn't really change the fact that growth is insufficient to solve many of your economic problems. And also necessary to address inflation, so buckle up buttercup
You end by describing this as a mild recession, but inflation is running hot. If historic measures are any indication it will take a lot more interest rate hikes to get under control, meaning we are at the start of something much more painful. On top of this, the high government debt makes for uncharted territory - a brief spike in interest rates to combat inflation may be survivable, but sustained higher interest rates will be intolerable for the federal deficit. What happens then? Letting inflation burn out of control is unthinkable; radical cuts in government payouts on the one hand or radical tax increases on the other will have either the producers or parasites up in arms (literally), and will inflict their own economic devastation either way.
I don't think inflation is the real danger any longer. Supply chain gaps are being rapidly filled, and inventories are growing. Additionally, commodities are now falling dramatically. And all thus has happened in response to a mere 75 basis point hike (before yesterday's action). That points to tremendous underlying financial fragility (probably caused by too much private debt, a problem left unresomved after 2008, when we shoukd have dealt with it).
Also worth noting the change in the Fed stance. Fed met last on June 15. Powell justified the largest Fed rate hike since 1994 on the following grounds:
The economy was strong.
Payrolls were booming.
The consumer was strong.
Weaker retail goods sales were offset by stronger services purchases.
Long-term inflation expectations were rising.
Before June 15, most of the U.S. economic data did not support Powell’s claims.
Since then, we have had an across-the-board deterioration in almost all economic indicators:
Yes, payrolls have remained ridiculously strong. But we now have a 3-month average household survey job change that is significantly negative. Whenever that has happened in the past we were already in recession. All the survey data and initial claims show considerable employment deterioration.
On June 30 the report on overall real PCE showed the same downward revisions as had retail sales, and it also showed an outright decline in real PCE in May, as has had the report on retail sales.
On inflation expectations Powell was referring to a rise in the 5-year inflation expectations in the Michigan sentiment survey to 3.3% which he said was “eye-catching”. That number was revised down to 3.1%, and the preliminary July reading is down further to 2.8% where it was before the inflation indices took off.
Since Powell spoke that June 15, most commodity prices have fallen, and many have crashed.
Since Powell spoke many economic indicators have plunged: the most recent bring new home sales with revisions, existing home sales, housing starts, the S&P Global PMIs, real construction spending, and industrial production with revisions.
The commentariat are aware of this broad sweep of bad economic news. So are market participants. Look at bonds. Bond prices crashed on the Fed’s hawkish move in mid-June. Since then, they have been rallying. They have now traced out an impressive reverse head and shoulders pattern on the verge of a breakout. The denizens of the bond market, like almost everyone else, see that the economy is not strong, but that a recession is imminent and may be underway and intensifying
Inflation was always at least as much about demand as about supply. It's great that supply is fixing itself, but we need to keep bringing down demand until inflation cries uncle.
I think the Walmart earnings and the deteriorating consumption data is indicating that demand is coming down rapidly. In May the economic data began to speak of possible economic weakness. Suddenly and strangely in April the household survey measure of employment went severely negative. There was also a raft of surveys on consumer and business expectations that showed a deep dive into recession territory
Then came the May data that was reported in June. The real retail sales trend through revisions flattened out and then turned down with the May retail sales report. . The real PCE trend again through revisions, flattened out and also went outright negative in May. Real construction spending was flat through February and then turned sharply negative in March through May. Housing starts plummeted 15% in May. All the already weak survey data got worse. As a result of all these changes to the underlying data the Atlanta Fed GDPNow vector of all coincident indicators pointed to an outright contraction in GDP in Q2 following an outright contraction reported by the BEA in Q1.
Suddenly the odds were high that the U.S. economy might be entering into a recession. A lot of that was collapsing demand.
In addition, the inflation data has also departed from the 1970’s great Inflation paradigm. (which I had hitherto believed was the relevant parallel). Back then the inflation rate did not start to break until a recession was underway for many, many months. In the current case the core PCE deflator ratcheted down from a 6 percent rate to a mere 4 percent annual rate or less by February of this year. The average hourly earnings index of wage inflation ratcheted down to a similar 4% annualized rate in January. Both these absolutely key inflation measures have been telling us month after month since very early this year that core inflation has fallen dramatically from perhaps a 6% rate last year to less than a 4% rate this year.
I suspect you're right in the sense that the Fed will continue to hike rates, but I think they are making the same mistake they made in the middle of 2008.
Well not to mention that the lag from anything the Fed does and inflationary outcomes is at least 9 months, if not a year or two. Headline inflation will be whipsawed by oil prices (down 30% from peak but still way up YOY) and wages growth but core inflation will continue to rise due, again, to those lags.
Inflation was under control (btw, never below a 2% average after 2012, so can we now stop pretending we had a deflation risk?) for several decades because we sized QE appropriately to the decline in consumer borrowing in 2008/12, got ahead of inflation increases with nominal rate increases, and didn't try to debt finance (well actually Fed/taxpayer fund the deficit) more spending at times of low unemployment rates. For reasons I will never understand we started acting like "if we all agree on a 2% target then that will be inflation". Inflation has never worked like that in the US or anywhere else in the world, without a lot of pre-emptive and painful actions taken by central banks and congress.
For years, forecasts predicted the return of inflation, without any evidence of oil, wages or inflationary expectations getting out of control. Now we have all the inflation causing factors at work, and we will think inflation will magically come down on its own accord. I get the cynicism to high inflation forecasts but if you look at those 3 variables, your forecasts will improve overnight (at least directionally, quantifying the impact is still a lot of work)
The Fed started cutting rates January 2008 and continued throughout 2008. What was the mistake they made? Or is that a big ole typo? Also, if you are not going to mention oil prices, inflationary expectation measures, wage-inflation spirals, etc then your inflation forecasts is, empirically going to be a mess. Recession inflation correlation is weak at best.
The Fed realizes that it can take more than 1 recession to reduce inflationary expectations. Especially if oil prices don't collapse and if wages growth keeps accelerating. It is also painfully aware of the long time lags from doing anything to reducing inflation (not months, years). Unless Putin changes his mind about Ukraine, Iran gives up its nukes and the US decides to pump oil like crazy, we are not getting a free ride out of this inflation problem any time soon. Funny thing is, the data & forecasts supporting those notions in the 1970s still worked in the 2010s and yet everyone is acting like recent history is entirely irrelevant. Which, hey, maybe it is. But based on what.... nothing? Wishful thinking? Wilful ignorance?
Empirically there are some important variables to add to your framework. Inflation is driven by historical inflation (i.e. inflationary expectations; 90+% of next period's inflation rate increase will be passed on from last period increase), wages growth and oil prices. Your sentiment of needing to reduce demand is true, in so far as it reduces inflationary expectations and (one hopes, but can never be sure) next year's headline inflation rate. However, if wages and/or oil prices and/or inflationary expectations don't turn soon, then we have no hope of getting to 2% inflation even with a recession or two. And yes, we are already way above the "2% over the cycle target" so we can forget about "well maybe we just need to get to 3% inflation or 4% inflation?". That is not on the agenda for anyone (outside of media commentators).
Either way, even during the depth of the supply disruptions, almost half of the headline inflation was demand driven. And now it is services driven so it is well and truly here to stay.
What are the key drivers of headline inflation: oil prices, nominal wages, inflationary expectations. That is 90+% of inflation. Oil prices, obviously still a problem (YOY; the recent dip doesn't do much other than 1 quarter of lower headline inflation), wages are clearly becoming a major problem (our one hope that headline inflation didn't become entrenched in the US has now gone bye-bye) and inflationary expectations all around the world (with a few exceptions like NZ) going through the roof. Moreover, historically, reducing inflation takes years. YEARS. So I am curious how do you reconcile all of that historical data with your claims? Let's put it this way: how many recessions will it take to reduce 10% inflation to 2%? We can wait for your answer... So you can say "well everything is great in the last 6 weeks", except this isn't a 6 week exercise. And there is nothing in economic history to suggest that you will be right this time. So what is your foundation for all these claims? News headlines, apparently?
With inflation at very high levels, unemployment at very low levels, and the party in power in DC antagonistic to big business, it is hard to see where "growth" will come from, at least in the short term. More government spending in an economy that has no slack labor is reckless. Imploring big business to invest capital in labor saving (and productivity enhancing) technology is feckless.
I agree that fiscal stimulus when your unemployment rate is clearly below the "natural rate" is folly. However, your last sentence doesn't track. Regardless of what DC tells businesses to do, they are still going to look at the cost savings from tech or rapidly escalating labor costs. Why wouldn't they invest? Especially when nominal wages are off to the races (its not clear yet whether real wages will increase but odds are good). Your binary approach to investing is baffling. Also, post inventory recession, or whatever nomenclature makes people happy, the growth can easily come from consumer spending. Have you met American consumers before? They didnt reduce nominal or real consumption at all during this "recession". Growth in the US doesn't come from government projects, major export projects, or businesses inventing new industries, usually it is derived from inane consumer wants. I'm not sure what else to add, the data is black & white
Noah, in a comment below, you state that the Fed needs to tamp down on demand even though our supply issues are quickly righting themselves. I've read this analysis elsewhere, that our inflation problem is demand-driven.
This is the very essence of what people think of as a poor economy. Demand shrinks because people decide they can't afford things that they could a year ago.
People feel the gut punch of a decrease in their standards of living. They are in a very real sense, poorer.
It's amazing to hear Democrats making the claim that this is a good economic outcome.
Seems like a lot of people on Twitter think this is some sort of critical decision. I don't see how the NBER's classification should make any difference to 99% of people.
It really doesn't.
There are just competing attempts to weaponize and defang the term's impact on the midterms.
These rhetorical games are some of the stupidest aspects of democratic systems.
Well, I think it's fine. Since it matters so little whether we're "actually" in a recession according to *any* definition, I don't mind people arguing over whether the term applies.
Yeah. I'm mostly just being cranky.
*wanders off and yells about sophistry*
You know you are in a recession when you go to the grocery store and put gas in your car.
Would all the people bending over backwards and trying to avoid using the term "recession" for the last two negative quarters of GDP growth be doing this if Trump was still president?
No, definately not. This is exactly what is wrong with Journalists, academics and economists. Their political bias pollutes their opinions and articles depending who is in charge.
Minor correction: "There are basically three notions of “recession” — I call them the official definition, the official definition, and the academic definition." I assume the second one is supposed the be the fok definition?
Ah, thanks. Fixed!
Take all 3 definitions. Now, when you are trying to work out whether unemployment is going to be materially higher a year from now, does it matter which definition you use? Not unless you care about relitigating the past. I think we are losing the woods for the trees here. All because we dont want to have to admit we are in a recession during an election year. So fine, call it an "inventory recession", it won't change the implications for the future...
If you swapped "DNC" for "GOP", given the same economic circumstances, this column would literally be inverted.
Yeah, regardless of your politics, this article seems a real macroeconomic stretch. And the entire debate continues to obsess over definitions applied to a backward looking indicator, while ignorning the implications slower GDP has for everything from rents to incomes to inflation to unemployment. Outside of politics, a recession is neither here nor there. It is the consequences months or usually years down the track. But you guys enjoy yourself right now, ignoring time lags, spurious regressions and missing the entire point.
People like to say they are lagging indicators, consequences are years later, etc. That's BS.
Business sees these things and plan accordingly. They lay people off now, they cut back on spending and other things to position themselves to weather the coming troubled times.
The author's point is that he doesn't want Dems and Biden to take Carters place as the worst economy in the last 60 years
I'm not sure I would call an empirical fact BS. You say whatever sounds right to you, but common sense isn't a great tool when the data is so overwhelmingly clear. You also need to stop thinking in binary terms, yes, consumers cut back on spending when rates go up but not enough to bring down inflation or economic growth (at first). Some people do it immediately. But there are more influences on your decisions than just interest rates. For example, right now, a lot of consumer don't care about a 75 bps hike, what motivates their spending is the fact that their long desired TV is going to go up 10% in few months, so they want to buy it now. Etc. I get that you struggle to see the time lags if you get economic data from media stories, but look at the data. It is FREE, publicly available to anyone, heck you can look at it on your phone from bed (start with FRED is you are clueless, it is free and easy to use). Then tell me there is no lag....
I get the author's point. I am not addressing his political point. I really need you to focus on the arguments being made....
If you dont know what literal means, why would anyone think you know what an acronym means?
There has been quite a laugh in the uk at bidenomics trying to change from what you call the folk definition of a technical recession. 38 attempts at amendments of the definition in wiki occurred over the last 3 days. Pure trolling going on. Also the media were trailing it and some notable economists in advance. All to take the heat of biden.
Soon like Argentina in the past they'll fake inflation. I dont know if they would have the nerve to omit printing them. As you say it is politics but basically the left in the usa have become fundamentally dishonest. If it had been a republican they would have used the folk definition. But nber is just kicking the can down the road.
All for a backward looking indicator. Let's put it this way, what matters is the implications of a recession for the future. The important things like unemployment, inflation, trade deficits, public debt, housing prices, etc. All of these are impacted by a slowdown. Does anyone dispute we are in a slowdown? Does anyone doubt the extent of the slowdown will have a material impact on those key variables? And does anyone doubt that there are long time lags from these slowdowns to these other key variables? So why do you care about the definition of a recession? I mean, other than politics.
You care enough to put up several posts on the article and more or less repeating youself when one or at most two will do.
As for politics it is important but perhaps not to you. It reflects how society is managed including its economics.
If you are entirely above politics and economics then good for you.
Step 1: Google ad hominem attack
Step 2: focus on the issues being discussed (if you just want to argue and throw insults, you are on your own)
Step 3: ask yourself, do I care about getting my forecasts correct, or do I want to "feel good" about my tribe
Step 4: no one said any of things, so you might want to talk to someone about the arguments you think you are having with people
Good luck out there
P.s. can you think of any reasons to post the same info on multiple posts? It's pretty obvious but I'm not going to give you all the answers
Noah !! great article..wanted to share this https://www.youtube.com/watch?v=FxiZRYJTEo0
We went from 6% growth under Trump to negative growth in year or two under Biden
Well, technically for a quarter maybe but there was never annual GDP growth of 6%. But more importantly, do you give the President credit for growth? How about congress? the Fed? Even if you believe in your heart of hearts that Presidents deserve 100% of the credit/blame for economic outcomes during their tenure, does that mean you switch votes depending on which President happened to be in office when the Fed or Congress did stoopid stuff? It is a two edged sword.
Over Trump's four years real GDP grew at a 1.6% annual rate.
His highest annual rate was 3.0%.
Well thats fine? Another blurb to protect Biden and his policies. It would be fine if we did go from 6% growth under Trump to a recession under Biden in a couple of years.
Not protecting Biden or Trump. Just saying you dont want to give the president (of any party) all the credit or all the blame. I mean, have you heard of Fed independence? Also, Trump had a recession and he NEVER had 6% growth. Trump talked about wanting 6% growth and maybe you are getting confused by that. The data is free and publicly available so you can tell yourself whatever you want. Some of us aren't here to lobby for a politician (of any persuasion). But if you say economic dribble then people, even those who agree with your politics, will call you out on it.
Yes you are right. Growth under Trump was more like 2 to 3%. Not negative like under Biden now.
Again, you can get GDP data for free on your phone while sitting on the toilet. There is no reason to be this uninformed or bad at math. Google FRED gdp. It is basic algebra. If you don't want to look at the data, or you want to cherry pick the most recent quarter of growth, I can't help you. Good luck, you guys don't seem to care whether your info is accurate 👍
This is nothing other than a campaign ad for the Democrats and is intellectually dishonest. This is the first time in my 7 decades on the planet that a broad base of people - and ALL OF THEM from the left - decided that the definition of a recession is something different than two quarters for negative growth. Never happened before. Certainly not in 1992 (and I might add, that recession then was over by Election Day but announced by the deep state afterwards). Remember - “it’s the economy stupid”?
No one with one eye open can’t see that this economy is in terrible shape. That’s why the left is going through wind mill action to get rid of the R word and, like the border lie a blue streak. Oh yes, the border is secure. Secure enough for 3 million illegals to sneak in this year. Oh, no, there’s no recession and things are peachy. They still count as their achievement the “growth” in jobs and economic activity that was nothing other than the return to the status quo before they shut down the economy in 2020 when everyone lost their jobs and businesses were shut down. They know they’re lying. It’s astounding. But then again, who are you gonna believe - them,more your own lying eyes,.
How is your 7 decades of experience relevant? I mean, there are homeless drug addicts outside my home who are more experienced than that, but i tend to look for other criteria when it comes to analytical insights, like logic, data, facts, etc. The NBER isn't all from the left. Nor is the Fed. Nor is... oh why do we even bother
Right. Don’t bother. You are correct!!!!! It’s NOT the economy, stupid! Things are going just great! I feel wonderful eating a meal that cost 20% more than last year - that means it’s more valuable and I should feel swell about that, right? And gas prices? Pshaw! It just means getting there is all the more worthwhile. Murders on the rise? A great way to keep our social security costs down! Shoplifting on a major scale up? Spread the wealth!
Boy have you opened my eyes. Douche
I need to you to dig deep and focus on the item we are discussing. I never said ANY of those things. What i said is that the recession definition is agreed to by economists and politicians on both sides of the spectrum. You want to rant about who to vote for, go crazy, I don't care, but it is also not what we are discussing. Here is the thing about facts, you can check them on your phone while lying in bed. So there is no excuse to be this wilfully ignorant. Push your political views but try to get some basic facts correct.
What are you talking about. I said 1992
Sure, Clinton sold us out to China for dirty campaign money and now look where they are. And look where OUR manufacturing base went. He tried to sell out Israeli for a Nobel to clean his dirty reputation. He let Bin Laden get away. Then his wife got escalated as a result of his presidency and he sold us out again, for dirty Foundation gifts I. Exchange for lots of our uranium reserves. How the two of them avoid jail is beyond me,
And by the way, your mother thinks I look like Fabio, which is why, like Philadelphia cream cheese, she’s so spreadable it’s incredible.
These people never say “a recession now would be fine” before one happens. Instead, corrupt media voices line up to defend yet another blow inflicted by the Democrats by telling us “it’s fine.” It’s not fine - not by a long shot. We shouldn’t let ourselves be fooled by media sycophants.
Ultimately, it doesn't matter. If there is a slowdown, call it what you want, voters care because of its implications for their jobs, housing prices, mopirtgage rates, inflation, etc. Whether an economy grows 0.1% or shrinks by (0.1)% doesn't really change the fact that growth is insufficient to solve many of your economic problems. And also necessary to address inflation, so buckle up buttercup
You end by describing this as a mild recession, but inflation is running hot. If historic measures are any indication it will take a lot more interest rate hikes to get under control, meaning we are at the start of something much more painful. On top of this, the high government debt makes for uncharted territory - a brief spike in interest rates to combat inflation may be survivable, but sustained higher interest rates will be intolerable for the federal deficit. What happens then? Letting inflation burn out of control is unthinkable; radical cuts in government payouts on the one hand or radical tax increases on the other will have either the producers or parasites up in arms (literally), and will inflict their own economic devastation either way.
I don't think inflation is the real danger any longer. Supply chain gaps are being rapidly filled, and inventories are growing. Additionally, commodities are now falling dramatically. And all thus has happened in response to a mere 75 basis point hike (before yesterday's action). That points to tremendous underlying financial fragility (probably caused by too much private debt, a problem left unresomved after 2008, when we shoukd have dealt with it).
Also worth noting the change in the Fed stance. Fed met last on June 15. Powell justified the largest Fed rate hike since 1994 on the following grounds:
The economy was strong.
Payrolls were booming.
The consumer was strong.
Weaker retail goods sales were offset by stronger services purchases.
Long-term inflation expectations were rising.
Before June 15, most of the U.S. economic data did not support Powell’s claims.
Since then, we have had an across-the-board deterioration in almost all economic indicators:
Yes, payrolls have remained ridiculously strong. But we now have a 3-month average household survey job change that is significantly negative. Whenever that has happened in the past we were already in recession. All the survey data and initial claims show considerable employment deterioration.
On June 30 the report on overall real PCE showed the same downward revisions as had retail sales, and it also showed an outright decline in real PCE in May, as has had the report on retail sales.
On inflation expectations Powell was referring to a rise in the 5-year inflation expectations in the Michigan sentiment survey to 3.3% which he said was “eye-catching”. That number was revised down to 3.1%, and the preliminary July reading is down further to 2.8% where it was before the inflation indices took off.
Since Powell spoke that June 15, most commodity prices have fallen, and many have crashed.
Since Powell spoke many economic indicators have plunged: the most recent bring new home sales with revisions, existing home sales, housing starts, the S&P Global PMIs, real construction spending, and industrial production with revisions.
The commentariat are aware of this broad sweep of bad economic news. So are market participants. Look at bonds. Bond prices crashed on the Fed’s hawkish move in mid-June. Since then, they have been rallying. They have now traced out an impressive reverse head and shoulders pattern on the verge of a breakout. The denizens of the bond market, like almost everyone else, see that the economy is not strong, but that a recession is imminent and may be underway and intensifying
Inflation was always at least as much about demand as about supply. It's great that supply is fixing itself, but we need to keep bringing down demand until inflation cries uncle.
I think the Walmart earnings and the deteriorating consumption data is indicating that demand is coming down rapidly. In May the economic data began to speak of possible economic weakness. Suddenly and strangely in April the household survey measure of employment went severely negative. There was also a raft of surveys on consumer and business expectations that showed a deep dive into recession territory
Then came the May data that was reported in June. The real retail sales trend through revisions flattened out and then turned down with the May retail sales report. . The real PCE trend again through revisions, flattened out and also went outright negative in May. Real construction spending was flat through February and then turned sharply negative in March through May. Housing starts plummeted 15% in May. All the already weak survey data got worse. As a result of all these changes to the underlying data the Atlanta Fed GDPNow vector of all coincident indicators pointed to an outright contraction in GDP in Q2 following an outright contraction reported by the BEA in Q1.
Suddenly the odds were high that the U.S. economy might be entering into a recession. A lot of that was collapsing demand.
In addition, the inflation data has also departed from the 1970’s great Inflation paradigm. (which I had hitherto believed was the relevant parallel). Back then the inflation rate did not start to break until a recession was underway for many, many months. In the current case the core PCE deflator ratcheted down from a 6 percent rate to a mere 4 percent annual rate or less by February of this year. The average hourly earnings index of wage inflation ratcheted down to a similar 4% annualized rate in January. Both these absolutely key inflation measures have been telling us month after month since very early this year that core inflation has fallen dramatically from perhaps a 6% rate last year to less than a 4% rate this year.
I suspect you're right in the sense that the Fed will continue to hike rates, but I think they are making the same mistake they made in the middle of 2008.
Nah. If enough has been done to tame inflation we'll know it soon. Inflation data is monthly.
Well not to mention that the lag from anything the Fed does and inflationary outcomes is at least 9 months, if not a year or two. Headline inflation will be whipsawed by oil prices (down 30% from peak but still way up YOY) and wages growth but core inflation will continue to rise due, again, to those lags.
Inflation was under control (btw, never below a 2% average after 2012, so can we now stop pretending we had a deflation risk?) for several decades because we sized QE appropriately to the decline in consumer borrowing in 2008/12, got ahead of inflation increases with nominal rate increases, and didn't try to debt finance (well actually Fed/taxpayer fund the deficit) more spending at times of low unemployment rates. For reasons I will never understand we started acting like "if we all agree on a 2% target then that will be inflation". Inflation has never worked like that in the US or anywhere else in the world, without a lot of pre-emptive and painful actions taken by central banks and congress.
For years, forecasts predicted the return of inflation, without any evidence of oil, wages or inflationary expectations getting out of control. Now we have all the inflation causing factors at work, and we will think inflation will magically come down on its own accord. I get the cynicism to high inflation forecasts but if you look at those 3 variables, your forecasts will improve overnight (at least directionally, quantifying the impact is still a lot of work)
The Fed started cutting rates January 2008 and continued throughout 2008. What was the mistake they made? Or is that a big ole typo? Also, if you are not going to mention oil prices, inflationary expectation measures, wage-inflation spirals, etc then your inflation forecasts is, empirically going to be a mess. Recession inflation correlation is weak at best.
The Fed realizes that it can take more than 1 recession to reduce inflationary expectations. Especially if oil prices don't collapse and if wages growth keeps accelerating. It is also painfully aware of the long time lags from doing anything to reducing inflation (not months, years). Unless Putin changes his mind about Ukraine, Iran gives up its nukes and the US decides to pump oil like crazy, we are not getting a free ride out of this inflation problem any time soon. Funny thing is, the data & forecasts supporting those notions in the 1970s still worked in the 2010s and yet everyone is acting like recent history is entirely irrelevant. Which, hey, maybe it is. But based on what.... nothing? Wishful thinking? Wilful ignorance?
Empirically there are some important variables to add to your framework. Inflation is driven by historical inflation (i.e. inflationary expectations; 90+% of next period's inflation rate increase will be passed on from last period increase), wages growth and oil prices. Your sentiment of needing to reduce demand is true, in so far as it reduces inflationary expectations and (one hopes, but can never be sure) next year's headline inflation rate. However, if wages and/or oil prices and/or inflationary expectations don't turn soon, then we have no hope of getting to 2% inflation even with a recession or two. And yes, we are already way above the "2% over the cycle target" so we can forget about "well maybe we just need to get to 3% inflation or 4% inflation?". That is not on the agenda for anyone (outside of media commentators).
Either way, even during the depth of the supply disruptions, almost half of the headline inflation was demand driven. And now it is services driven so it is well and truly here to stay.
What are the key drivers of headline inflation: oil prices, nominal wages, inflationary expectations. That is 90+% of inflation. Oil prices, obviously still a problem (YOY; the recent dip doesn't do much other than 1 quarter of lower headline inflation), wages are clearly becoming a major problem (our one hope that headline inflation didn't become entrenched in the US has now gone bye-bye) and inflationary expectations all around the world (with a few exceptions like NZ) going through the roof. Moreover, historically, reducing inflation takes years. YEARS. So I am curious how do you reconcile all of that historical data with your claims? Let's put it this way: how many recessions will it take to reduce 10% inflation to 2%? We can wait for your answer... So you can say "well everything is great in the last 6 weeks", except this isn't a 6 week exercise. And there is nothing in economic history to suggest that you will be right this time. So what is your foundation for all these claims? News headlines, apparently?
With inflation at very high levels, unemployment at very low levels, and the party in power in DC antagonistic to big business, it is hard to see where "growth" will come from, at least in the short term. More government spending in an economy that has no slack labor is reckless. Imploring big business to invest capital in labor saving (and productivity enhancing) technology is feckless.
I agree that fiscal stimulus when your unemployment rate is clearly below the "natural rate" is folly. However, your last sentence doesn't track. Regardless of what DC tells businesses to do, they are still going to look at the cost savings from tech or rapidly escalating labor costs. Why wouldn't they invest? Especially when nominal wages are off to the races (its not clear yet whether real wages will increase but odds are good). Your binary approach to investing is baffling. Also, post inventory recession, or whatever nomenclature makes people happy, the growth can easily come from consumer spending. Have you met American consumers before? They didnt reduce nominal or real consumption at all during this "recession". Growth in the US doesn't come from government projects, major export projects, or businesses inventing new industries, usually it is derived from inane consumer wants. I'm not sure what else to add, the data is black & white
Recessions are great! keep telling yourself that !)!0+
Recessions are great! keep telling yourself that idiot
Noah, in a comment below, you state that the Fed needs to tamp down on demand even though our supply issues are quickly righting themselves. I've read this analysis elsewhere, that our inflation problem is demand-driven.
This is the very essence of what people think of as a poor economy. Demand shrinks because people decide they can't afford things that they could a year ago.
People feel the gut punch of a decrease in their standards of living. They are in a very real sense, poorer.
It's amazing to hear Democrats making the claim that this is a good economic outcome.
We should just adopt the Sahm Rule.