Where is the Recession?

When did the definition of a recession change from “two consecutive quarters of negative GDP growth” to “not as much growth as we want”?

Everyday day I sit here and read and hear folks pontificate about the US “currently being in recession”. Yet, when one looks at the numbers, not only we not “currently in a recession”, we are not even approaching one.

It has been almost two decades since the last true recession in the US. I know we experienced slowdowns in the mid 1990’s and early 2001-2002 but if we are being honest, those were just simply bumps in the road. In Q4 1990, GDP fell 3% and Q1 1991 followed with a 2% drop from there. We have not had consecutive negative quarterly growth since then. In short, we are spoiled. Prior to the 1990-1991 recession, people had only go back 9 years in their memories to remember the last one. We are currently approaching year 19 which means there are a whole class of investors who have never actually experienced a recession in their investing lives…

So, where are we now?

Gross domestic product rose at an unrevised 0.6% annual rate October through December, the Commerce Department reported today, in line with expectations. For the current quarter ending Monday, economists expect growth to be flat. For Q2, economists expect GDP to fall 1%.

For all of 2007, the US economy grew at the weakest pace in five years, rising at an inflation-adjusted 2.2% rate compared to 2.9% in 2006.

The Labor Department reported that initial claims for jobless benefits fell 9,000 last week but remained at elevated levels. Also, the previous week’s level was revised down by 3,000. The unemployment rate remains at historically low levels.

Inflation, (consumer prices) was revised down to a 3.9% annual rate in the quarter from 4.1% previously reported. Core prices, which exclude food and energy costs, rose at a 2.5% pace, again revised down from 2.7%

None of those numbers, NONE, are recessionary.

Expectations of both business and economists are for the “economy to turn around” in the second half of 2008. So, if this is true, and we have flat growth in the current quarter, we are now running out of time to have a recession.

In fact, the “recession we are in but not entered into yet according to actual data” will most likely never materialize. Confusing?

Remember back in the late 1990’s when people began redefining earnings and were using EBITDA instead the actual EPS? It was as if they wanted us to believe taxes and interest on debt no longer mattered. When people start to redefine metrics, they are doing so to make the current situation fit the outlook they want us to see.

This means when you read or hear people lamenting the recession we are in “due to housing”, you would do best to ignore them. Housing is a significant part but not the total of the economy. They are trying to redefine what a recession actually is.

We are facing “slowing growth” not “negative”. Until we get a single quarter of negative GDP growth, ANY talk of recession is just that, talk.

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