April 30, 2008

A non-Classic Recession

No, I am not saying that the US economy is not and will not be in recession.

Like the old schoolmarm who still tries to teach the difference between who and whom and cautions her students to not, I mean not to split infinitives, I am standing up for a recession as a specific, measureable, binary thing. My main nemesis is the Associated Press wire service:

Economy grows by only 0.6 percent in 1st quarter of 2008

WASHINGTON - The bruised economy limped through the first quarter of this year at only 0.6 percent as housing and credit problems forced people and businesses alike to hunker down.

The country's economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday. The statistic did not meet what economists consider the classic definition of a recession, which is a retraction of the economy. This means that although the economy is stuck in a rut, it is still managing to grow, even if modestly.

So, like New Coke® and Coke Classic®, we have a classic recession, where the economy suffers two consecutive quarters of negative GDP growth, and a "New" recession where a Republican is in the White House and growth is sub par. Got it.

UPDATE: Professor Mankiw notes that the probability of a recession in 2008 has fallen to 25 percent in the latest trade at intrade.

Economics and Markets Posted by John Kranz at April 30, 2008 9:49 AM