Like the "recession" of 2001, if the current downturn is eventually classified as a recession, it will likely be one of the mildest recessions on record. A "blip".

What I find interesting about this debate is not how the talking heads continue to press the question (like a button for the applause sign), but with all the debate and questioning, how the inevitable answer is that we wont know until we know and that will likely be after the fact.

So, all you newscasters and reporters, please find something productive to do.....for once.

Its funny to listen to these idiots invent new ways of looking at the same data. Then they change the name or reference exactly the same thing with a new phrase to get a more impactful response. Economics may not be perfect. Its more of an art than a science. But economists try to standardize and define things to minimize overall "fuzziness". Growth means "its getting bigger". Contraction means "its getting smaller". OK? A recession is two consecutive quarters of contraction. That's it. OK?

So what is a "growth recession"? Anybody? Anybody? Manipulative news reporter? Anybody?

This is a term coined by a talking head to describe the economy when it slows down a little. It doesnt describe contraction, but rather when the economy is growing more slowly than it was before.

We need add reporters and journalists to the list, along side attorneys, stock brokers and used car salesmen.

Feldstein is the Chairman of the National Bureau of Economic Research (NBER), and they are usually considered to be the final arbiters of recession timing. As you note, usually after the fact.

However, Feldstein is on record as saying he thinks we ARE in a recession, that it began in January 2008, that it will last at least 16 months, and that it will be more like the 1980-1982 recession than the 2001 recession.

And the 1980-1982 recession was not a 'blip'.

I hope you can provide a quantitative definition of "blip". Otherwise, you are doing it too!

A 1982 paper by Charles Nelson of the University of Washington and Charles Plosser of the University of Rochester is now considered a classic paper in macroeconomics. The title was "Trends and Random Walks in Macroeconomic Time Series: Some Evidence and Implications", published in the 'Journal of Monetary Economics', September 1982. [Mr. Plosser won the Nobel Prize in Economics, based in part on this contribution, and now serves on the Fed Reserve Board of Governors, where is usually considered to be the sharpest anti-inflation 'hawk', and has dissented from some of the recent interest rate cuts.]

In the paper, Nelson and Plosser provided statistical evidence that business downturns are not entirely temporary events. Some permanent reduction in output is associated with the typical recession. Quoting from the Abel/Bernanke textbook on Intermediate Macroeconomics, "The severe 1973-1975 recession illustrates the potential permanence of cyclical changes in output. [There is a graph accompanying this discussion, which shows both a trend line for real GDP from 1947 to 1996, and actual real GDP.] The solid curve...shows actual real GDP...The dashed curve shows the trend in real output, based on the period 1947-1973 and extended through 1996. In the 1980s and 1990s GDP remained well below the levels it would have reached on the basis of the earlier trend, suggesting that the 1973-1975 recession was associated with a permanent reduction in real GDP. Of course, we can't conclude that the 1973-1975 recession directly caused the subsequent slowdown. External factors, such as OPEC's quadrupling of oil prices, may have caused both the recession and the subsequent slowdown. Alternatively, the slowdown of growth after 1973 may have been purely coincidental and unrelated to the 1973-1975 recession. Whatever the reason, much of the 1973-1975 drop in output became permanent....Output declines in recessions not associated with long-lasting supply shocks...may well be less permanent than the 1973-1975 decline. Indeed, one statistical analysis--by Pierre Perron of Princeton University--concluded that, of post-World War II recessions, only the 1973-1975 recession had a significant permanent effect on the level of output. [The paper cited is "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis", from 'Econometrica', November 1989.]"

The 1990-1991 recession appears to have been a 'blip': it appeared on the economic 'radar screen', and then disappeared, without leaving any permanent traces. The 1973-1975 recession was different; that left a permanent mark on the 'radar screen'...which is why I have always made such a big deal out of 1973 as marking a major turning point in American and world economic history.

Well. I hope you found that at least thought-provoking.

Moreso than a fall in a statistical estimate (GDP), a recession IS a fall in output.

Of late, output of vehicles AND houses has fallen.

GDP is adjusted moronically for inflation by applying ONE number -- the deflator -- rather than by subdividing the economy into 10-15 sectors and deflating each of them by its applicable inflation rate. Doing that would adjust each sector by an inflation rate that is far more difficult to fake.

To begin with, also, GDP before inflation is estimated and lied about to make the incumbent govt look good.

Even if GDP before inflation is said to have grown, it is merely in dollars. Quality is not estimated. Nor is the content's difficulty. A dollar of manure is considered equal to a dollar of uranium.

To validly "call" a recession requires estimating the physical volume of output and its quality. USA goods fall behind Germany's and China's on the world market, so you can assume USA quality has fallen.

Inside USA, a lot of "GDP" is services. These have fallen drastically in quality, as demonstrated by things like auto and electronics repairs, as well as the plethora of rotten vegetables in supermarkets, along with hormoned meats and milk, plus chemicalized breads. You really don't want products or services from American workers any more. They are likely to be on the telephone or planning vacations at work, or doing medical claims. Manicures, however, can be trusted and are done by Koreans. And medical care is OK if by Americans, but inordinately expensive (now around $45 a minute and 16% of GDP "on the books").

Sovereign: Moreso than a fall in a statistical estimate (GDP), a recession IS a fall in output.

LeRoy: In REAL output, to be more precise; though NBER actually looks at a lot of other variables, such as employment. The standard 'textbook' definition of two consecutive quarters of declining real GDP is actually kind of a junior high school definition. As we have been commenting here in Moneybox, it is abundantly clear that real GDP per capita is certainly declining; and that is at least a proxy variable for the nebulous 'standard of living'. I don't think we are in disagreement that the standard of living is falling for most 'average' Americans. For some, it is falling at an alarming rate; which is why you hear stories (which are TRUE) of Americans selling off their family heirlooms so they can put gas in their car tanks.

Sovereign:

Of late, output of vehicles AND houses has fallen.

LeRoy: No doubt. The auto industry and the construction industry, especially, are the leading indicators of this recession. Men, in particular, are losing jobs in large numbers; women, being more concentrated in the education and healthcare sectors, are doing a bit better on the jobs front, though their pay is very stagnant. Some of them are probably getting tired of supporting the 'loafing-around-at-home' men in their lives. Expect a big uptick in the divorce rate.

Sovereign:

GDP is adjusted moronically for inflation by applying ONE number -- the deflator -- rather than by subdividing the economy into 10-15 sectors and deflating each of them by its applicable inflation rate. Doing that would adjust each sector by an inflation rate that is far more difficult to fake.

LeRoy: Why 10-15? Why not 28-33? Isn't your number of 'sectors' kind of arbitrary?

Sovereign:

To begin with, also, GDP before inflation is estimated and lied about to make the incumbent govt look good.

LeRoy: True, but no one really thinks this began before Richard Nixon started finagling with the numbers in about, well, 1973. And it didn't really reach serious proportions until 1983, when they started using 'Owner's Equivalent Rent' to hide the rapid increase in the cost of housing. They started messing with the unemployment numbers a bit earlier, during the Kennedy administration.

Sovereign:

Even if GDP before inflation is said to have grown, it is merely in dollars. Quality is not estimated.

LeRoy: Well, the Bureau of Labor Statistics (BLS) does try to estimate quality. The funny thing is, the quality of goods always seems to IMPROVE, in their opinion; they never seem to record any declines in quality. You and I know that is bogus, but...

Sovereign:

Nor is the content's difficulty. A dollar of manure is considered equal to a dollar of uranium.

LeRoy: Now this, I do not think is a valid complaint on your part. A dollar of manure no doubt weighs a great deal more than a dollar of uranium. More to the point, though, if someone is spending a dollar on manure, they must think it has a dollar of value to them (as fertilizer, one hopes, and not as food; see my recent reply to Tundra here in Moneybox!); otherwise, they would not be spending a dollar on it.

Sovereign:

To validly "call" a recession requires estimating the physical volume of output and its quality. USA goods fall behind Germany's and China's on the world market, so you can assume USA quality has fallen.

LeRoy: I think the quality of many of our goods has likely fallen. On the other hand, I think the quality of HP notebook computers has probably risen in the last few years. It's a mixed bag.

Sovereign:

Inside USA, a lot of "GDP" is services. These have fallen drastically in quality, as demonstrated by things like auto and electronics repairs, as well as the plethora of rotten vegetables in supermarkets, along with hormoned meats and milk, plus chemicalized breads. You really don't want products or services from American workers any more. They are likely to be on the telephone or planning vacations at work, or doing medical claims. Manicures, however, can be trusted and are done by Koreans. And medical care is OK if by Americans, but inordinately expensive (now around $45 a minute and 16% of GDP "on the books").

LeRoy: OK. I run into knuckle-headed cashiers at 7-11 almost every week, who have never learned how to make change, like the nincompoop who thought that two dimes was equal to forty cents. Blame that on our educational system, which I have complained about ad nauseum. But vegetables, meat, milk, and bread are goods, not services. Non-durable goods, to be precise, and maybe they're leaving those vegetables out there in the produce aisle a little too long, if they're turning rotten. I get better quality vegetables out here, which I suppose is a benefit of living in a very agricultural area, as northern Colorado is and Manhattan is not.

LeRoy: I think the quality of many of our goods has likely fallen. On the other hand, I think the quality of HP notebook computers has probably risen in the last few years. It's a mixed bag.

It's interesting that you should say that. I bought a Compaq laptop a few weeks ago (that is, an HP product, of course) and I just turned it over to confirm that it is made in China. Oh, well!

No doubt most notebook and laptop computers are being assembled in China these days. Taiwan had a large portion of the computer assembly industry a few years back; I wonder if they are feeling the competitive pressure from the mainland.

But the computer was designed in the U.S., and I am betting that many of the chips inside your fancy new laptop are still manufactured here in the U.S.

Just by chance, there happened to be a news item on CNBC, as part of their China earthquake coverage reporting that Intel had announced that their plant (in China) had not been damaged by the earthquake but wouldn't resume production until damage is repaired. So who knows where the chips are made. Could be that they are just packaging the chips.

I do know that Korea is probably the largest DRAM chip manufacturer. Also, Lenova (Chinese) bought the IBM PC manufacturing operation and builds both IBM and Lenova computers. I bought an LG (Korean) DVD writer and found that was made in China. So is my new SanDisk Flash drive, my Lexar flash drive, my Duracell battery charger, my Uniden telephones, my Oregon Scientific "atomic" clock-thernometer, and my Nikon pocket camera. I'm sure that if I keep turning things over, I could add dozens of things to this list. I don't think they are doing just assembly there.

That's what folks called Britain back in the 19th century, when the sun never set on the British Empire. Some people called America the 'Workshop of the World' in the 20th century. China pretty clearly is going to be the workshop of the world in the 21st century. You are certainly right that a stunning proportion of the world's manufacturing is being done in China today; and more, probably, in the near to medium-term future.

Probably inevitable, once China decided to join the capitalist world economy.

Should we tell them to knock that off?

Capitalism has many rooms. My (biased, perhaps) understanding is that the central theme is that the ownership of the means of production is separated from the users (labor) of those assets. I think it is obvious that there is some limit to the size of a producer that can have individual ownership. Because the Chinese laborers (by the book) have ownership through the government intermediary and American laborers (by the book) can have ownership through stockholding, I see the two structures as equivalent, and I classify both as capitalism. It's a matter of convenience and necessity and is no big thing. I think all societies, including the most primitive, can be classified as capitalist, even if it just means that the war canoes aren't individual property. I think what is most variable among the various forms is the extent to which ownership participation is negotiable.

BTW: Are you related to R. Duncan Luce? I wasn't familiar with the name, but saw it mentioned in William Poundstone's "Prisoner's Dilemma".

As far as I know, I am not related to R. Duncan Luce...but it seems quite possible that we are distant relatives of one degree or another. Luce is an old Scottish name; I am thinking of having my genome analyzed, so I can find out which of the 'seven daughters of Eve' is in my ancestry. [The book of that title, by Brian Sykes, professor of genetics at Oxford, is an excellent read on the new science of genetic archaeology.]

My sister once told a journalism professor, in front of the whole class, that she was the niece of Clare Boothe Luce. It was a flat-out lie. One that collapsed when the professor asked her the next day if she might be able to arrange a guest lecture by the famous Clare Boothe.

Oh, and whatever your definition of capitalism, it is abundantly clear that China underwent a major change in the post-Mao period, beginning in the late 1970s. Napoleon once said that 'China was a sleeping giant'. The late 1970s was when China woke up. And India underwent some pretty major changes in the early 1990s, altering their whole economic 'landscape'.

I read "Seven Daughters of Eve" and found it very interesting. However, I have this lingering feeling, which I can't put a reasonable explanation to, that there is something out of kilter in the author's rationale. It may not change the conclusions any, but it is teasing me, like a sharp tooth that engages your tongue once in a while.

The portion of China near the coast has undergone considerable change, but I am not sure that applies equally to Western China. I think a lot of their government's actions are tempered by the thought of how that majority might react. I believe that the slow increase in industrial wages might be based on a desire to avoid displeasure among the farmers.

Leroy:

And neither will this recession be a blip. We have yet to emerge from the slump which has put 9+ percent of th work force on the sidelines. If we look at GNP, we are in a recession as it is negative.

Nice discussion