Why do people say US is in recession, when GDP is 3.9%?

Discussion in 'Economics' started by The Kin2, Nov 3, 2007.

  1. US recession to hit India hard, says Roach, India
    Asia told it cannot expect immunity from US slump,UK
    American recession unlikely to burst boom in the west, Australia
    Fed 'will cut rates to 4pc to stop recession', UK
  2. clacy


    I think a lot of people forget what the definition of recession really is.

    I think another factor is that many people don't trust the US government's data.

    And many bears or dooms-dayers just try to paint a horrible picture because that is what they do.
  3. Jim Rogers quits dollar after declaring US recession, UK
    Mexico Is Well Prepared to Face US Recession, Carstens Says, Mexico
    How to cook an economy First, bring to the boil, then ..., Australia
    US recession shows no recovery in '08, France
    US 'undoubtedly in recession' investor Jim Rogers says, Canada
    Caterpillar warns of US recession, Canada
    A Different Kind of US Recession - Nominal Vs Real Decline in GDP, UK
  4. dcvtss


    "Business Standard, India - 21 hours ago
    Stephen S Roach, chairman of Morgan Stanley Asia, today warned that Asia and India will be hit hard due to a likely recession in the US in 2008"

    "Chicago Tribune, United States - 2 hours ago
    ... economic concerns -- a brutal housing correction, troubled financial markets and hard-hit banks -- they could be the catalyst for a possible recession. ..."

    "Onet.pl, Poland - 2 hours ago
    Pressed on whether the credit crunch could trigger a recession in the US, Taylor told the program, "It could do." Asked if there was the prospect of another ..."

    "Sydney Morning Herald, Australia - Nov 2, 2007
    IF THE United States has a slowdown or recession, the resulting flow through to commodity demand in Asia should only have a mild affect on the robust West ..."

    huh? The articles are talking about a possible recession in the future...
  5. Exactly! Why are the headlines so misleading?

  6. We COULD be in a recession already IF GDP were measured as "number of widgets and services produced/sold". That is, we might be producing fewer if measured year-over-year.

    However, GDP is reported in "cumulative PRICE of goods and services sold", so the price inflation component is included.

    And with inflation much, MUCH higher than the Gummint claims, most of what is called "GDP and Growth" is merely "inflated prices".

    So, what does "3.9% GDP" ACTUALLY mean? That's anybody's guess. Maybe the Gummint knows, maybe not. BUT... they do want to keep telling us "things are growing and all is fine". Is it?? Elephino.
  7. poyayan


    First, I am not sure how much trust we can put on this number. ( Meaning it might be revised later )

    Second, US to EUR exchange rate fall ~8.7% this 3 months. If U.S. has 3.9% GDP, it still look like a recession of -3.8% to the europeans.
  8. If the inflation number they are using was 5 or 6% instead of 1 or 2%, then the result would be an equal decline in the GDP growth rate, giving at best no growth, or just as likely a recession. You can only fudge numbers so long before people smell the smoke.

    Take, for example the jobs numers reported yesterday. They say 166,000 net new jobs were created last month. They say the construction industry reported a loss of 19,000 jobs, but then they adjusted that with their "birth/death" adjustment by saying that new businesses and small businesses created 14,000 NEW construction jobs, thus giving a net loss of 5,000 jobs instead of the 19,000 actually reported by employers. The BLS refuses to divulge how these adjustment jobs are arrived at.

    They did the same thing in financial services, adding 25,000 imaginary jobs to the losses reported.

    They did the same thing in Professional and Business services, adding another 36,000 jobs in that category.

    The total number of jobs added by the "birth/death" adjustment last month was 103,000 of the 166,000 reported added.

    What if instead small businesses were actually closing their doors or telling their contractors there was no work? In those industries, I suggest that this was far more likely the case.

    The "household jobs survey" which is done by calling a random number of homes came up with a LOSS of 200,000 jobs last month.

    Both methods are ridiculously unreliable, and in this day and age we should just have a database of all eligible workers in the country noting who is looking for work vs who has a full time job.

    The old saying goes "Its not the figures that lie, its the liars that figure"
  9. heypa


    There is not a single government statistic that can stand "Light of day" scrutiny. The basic assumptions, the adjustments etc. make them all suspect. Hell how long will it be before a Mc Donalds "Big Mac" will someday be identified as a manufactured product?
    #10     Nov 3, 2007