About That Double Dip Recession
Sadly, another turn down in the economy seems inevitable. Despite all the stimulus money, despite QE1 and QE2, and low, low interest rates for years now, the economy can't get out of its own way. Now the U.S. is locked into fiscal austerity, and without businesses doing much to create jobs, the economy is stalling. It's looking more and more like we'll have the first true double dip recession since before I was born. And that's a long time ago.
At Freakonomics, Matthew Philips compiled a non-scientific poll of well-known economists last week, asking their bets on a double dip. It's another case of no one knowing anything -- the answers aren't rigorous, but maybe the questions weren't either -- but what little the big names do know seems to be headed the wrong way. (I do wish he had put a time frame on it, though.)
Asha Bangalore, the astute economist at Northern Trust, gets technical about just what constitutes a double dip recession:
Robert Hall, prior Chairman of the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), refers to a double dip as a long recession marked by a brief period of economic growth. He explains further that during a double dip "activity might rise for a period, but not far enough to complete a cycle, then fall again, and finally rise above its original level, only then completing the cycle."She adds that the U.S. has not had a double dip recession, so defined, in the 1950 period.
Along with the report of weak growth in the second quarter on July 29th, the Bureau of Economic Analysis shaved a fair amount of GDP from the past few years. (The BEA makes adjustments to reported GDP for years after the fact, based on the eventual receipt of more and more complete data.)
For instance, 2010 GDP was reduced by about one percent, and 2009 by about 1.25 percent. In both cases the reason was lower personal consumption expenditure, and as best I could tell the adjustments came about because we didn't spend quite as much on health care as originally thought. (United Healthcare, I'm ready for that refund any time.)
Anyway, here is what the true, or more true, path of the U.S. economy looks like:
