It’s not that difficult these days to find media outlets promoting the notion that the U.S. economy is in a recession, when in fact it is not. That was one of the successful tactics employed by the Clinton’s in 1992 in their bid for the White House. Anyone who has ever played for a sports team that won games by executing the same basic play will appreciate the irony in the latest version of the tune, “Wishin’ and Hopin’ for a Recession.”
On October 18 a report on CNN stated that “Nearly half of Americans feel the U.S. economy is in a recession, marked by a significant decline in economic activity.” CNN noted that the National Bureau of Economic Research (NBER), the economic profession’s business-cycle umpire, defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales.”
But CNN avoided explaining which of these economic indicators — if any — are contracting.
In fact, each has been expanding.
GDP has expanded for 23 consecutive quarters, dating back to the third quarter of 2001. Employment has increased for 49 consecutive months, dating to September 2003. Industrial production continues to grow, with its latest reading coming in at 114 percent of its 2002 average. Ditto for personal income (less transfer payments) and manufacturing and trade sales as calculated by the Conference Board.
You get the point: Where’s the proof that we’re in a recession? Quite simply — unless you equate recessions with dips in a stock market that is trading near all-time highs, or you live in Michigan where employment has contracted each year since 2000 — there isn’t any.
All this is not to say that the economy is recession-proof. There is a business cycle, and expansions are followed by contractions. The current expansion, which started in November 2001, will eventually end like all previous periods of growth. And when it does the evidence will appear in the indicators.
CNN, it turns out, has been wishin’ and hopin’ for a recession for a good while now. In late 2006 the network aired a report called “Recession clouds darken 2007 outlook.” In spring 2007 the network aired another report that concluded, “Most say a recession in the next year is somewhat or very likely.”
Of course, as November 2008 approaches, you can expect to hear the tune “Wishin’ and Hopin’ for a Recession” more and more. Why? Very simply, if the media can pin even a perceived recession on the party in the White House — the GOP — the chances that the GOP will keep the White House diminish exponentially.
Recall that there was a bitter argument in 1992 about whether the U.S. economy was still in the recession that the NBER announced in April 1991. Incumbent President George H.W. Bush and his supporters maintained that the recession had ended. But the Clinton’s and their supporters argued otherwise. In James Carville’s now-immortal words, “It’s the economy, stupid.” The NBER didn’t get around to declaring that the recession had in fact ended in March 1991 until December 1992, a month after the election. But by then it didn’t matter that the U.S. was not in a recession that election year. The Clinton’s had already won.
One lesson here is that one should look to the economic indicators reported by the federal government, and not media outlets like CNN, for evidence as to whether or not there is a recession. When employment, industrial production, and other key indicators contract for at least a quarter, the indicators are recessionary. But in the current cycle this has not occurred. The other lesson is that recessions are nonpartisan events that do not exclusively favor either major party, whether Republican or Democrat.
Until indicators say otherwise, the song “Wishin’ and Hopin’ for a Recession” can only be sung off-key, although that won’t stop it from being sung.