So, many bobble-headed leftards are lurching forward with the notion that Canada is in a recession. There are now millions of would-be economists declaring Canada is in a recession, and they’re attacking P.M. Harper for not acknowledging the declared recession. Note!!!! I’m not an economist. However, there are things I know about economics which these blithering idiotic advocates obviously don’t know.
A great example of what I’m on about is this from the AP ….
TORONTO (AP) — Canada has fallen into a recession, dragged down by falling energy prices and economic troubles in China.
The Canadian economy retreated at an annual pace of 0.5 percent from April through June after sliding 0.8 percent the first three months of the year, Statistics Canada reported Tuesday. Two consecutive negative quarters are the technical definition of a recession. …….
First of all, before I go any further, let be even more emphatic than this idiotic AP drivel. The technical definition of a recession isn’t a governmental question. It’s an academic question; specifically an economic academic question. Governments can’t declare what is or isn’t a recession! That’s the most inane stupidity!
The reason why I bring that up is because the EU defines a recession as two consecutive negative quarters of real GDP growth. Don’t want to be in a recession? Just have your government change the definition and then you’ll be set!!!! How stupid is that?
Two consecutive negative quarters (of real GDP) is not the technical definition of a recession!!!!!
I know this because there is no such thing as a technical definition of a recession. It is complete and utter sophistry to rely solely on real GDP to determine whether or not a place is in a recession or not. While we’re here, let’s note that the AP story doesn’t tell us if they’re using real GDP or nominal GDP. Regardless, real GDP is not a euphemism for “the economy”.
But, where did the “two consecutive quarters” sophistry come from? To the would be economic reporters out there, it’s not hard to look up!
In a 1975 New York Times article, economic statistician Julius Shiskin suggested several rules of thumb for defining a recession, one of which was two down consecutive quarters of GDP. In time, the other rules of thumb were forgotten. Some economists prefer a definition of a 1.5-2 percentage points rise in unemployment within 12 months.
In the United States, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER defines an economic 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.” Almost universally, academics, economists, policy makers, and businesses defer to the determination by the NBER for the precise dating of a recession’s onset and end.
In the United Kingdom, recessions are generally defined as two consecutive quarters of negative economic growth, as measured by the seasonal adjusted quarter-on-quarter figures for real GDP. The exact same recession definition applies for all member states of the European Union.
Well, yes, that’s just Wiki. I would encourage all to read the references. Shiskin, himself, said it was a “rule of thumb”, he didn’t say it was the emphatic and technical definition of a recession.
But, let’s go to the above mentioned NBER.
The NBER’s Business Cycle Dating Committee
The NBER’s Business Cycle Dating Committee maintains a chronology of the U.S. business cycle. The chronology comprises alternating dates of peaks and troughs in economic activity. A recession is a period between a peak and a trough, and an expansion is a period between a trough and a peak. During a recession, a significant decline in economic activity spreads across the economy and can last from a few months to more than a year. Similarly, during an expansion, economic activity rises substantially, spreads across the economy, and usually lasts for several years.
In both recessions and expansions, brief reversals in economic activity may occur-a recession may include a short period of expansion followed by further decline; an expansion may include a short period of contraction followed by further growth. The Committee applies its judgment based on the above definitions of recessions and expansions and has no fixed rule to determine whether a contraction is only a short interruption of an expansion, or an expansion is only a short interruption of a contraction. The most recent example of such a judgment that was less than obvious was in 1980-1982, when the Committee determined that the contraction that began in 1981 was not a continuation of the one that began in 1980, but rather a separate full recession.
The Committee does not have a fixed definition of economic activity. It examines and compares the behavior of various measures of broad activity: real GDP measured on the product and income sides, economy-wide employment, and real income. The Committee also may consider indicators that do not cover the entire economy, such as real sales and the Federal Reserve’s index of industrial production (IP). The Committee’s use of these indicators in conjunction with the broad measures recognizes the issue of double-counting of sectors included in both those indicators and the broad measures. Still, a well-defined peak or trough in real sales or IP might help to determine the overall peak or trough dates, particularly if the economy-wide indicators are in conflict or do not have well-defined peaks or troughs.
FAQs – Frequently asked Questions and additional information on how the NBER’s Business Cycle Dating Committee chooses turning points in the Economy
Here’s more from their FAQs ……
Q: The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP. How does that relate to the NBER’s recession dating procedure?
A: Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. In 2001, for example, the recession did not include two consecutive quarters of decline in real GDP. In the recession beginning in December 2007 and ending in June 2009, real GDP declined in the first, third, and fourth quarters of 2008 and in the first quarter of 2009. The committee places real Gross Domestic Income on an equal footing with real GDP; real GDI declined for six consecutive quarters in the recent recession.
Q: Why doesn’t the committee accept the two-quarter definition?
A: The committee’s procedure for identifying turning points differs from the two-quarter rule in a number of ways. First, we do not identify economic activity solely with real GDP and real GDI, but use a range of other indicators as well. Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology. Third, we consider the depth of the decline in economic activity. Recall that our definition includes the phrase, “a significant decline in activity.” Fourth, in examining the behavior of domestic production, we consider not only the conventional product-side GDP estimates, but also the conceptually equivalent income-side GDI estimates. The differences between these two sets of estimates were particularly evident in the recessions of 2001 and 2007-2009.
But, those are just a bunch of economist eggheads sitting around constantly thinking about economics. We should defer to the members of the media who once heard about an article in the NY Times which stated a “rule of thumb”.
Well, there are other authorities who we can turn to. I can’t tell you I’ve read them “all”, because I won’t presume to define “all” of the great economic minds. But, from Smith to Mises to Friedman to Sowell, I’ve never once read where they advocated or stated such a notion.
The words “Gross Domestic Production” doesn’t hold the same definition as “economy”! GDP is an economic indicator, only!!!! No serious economist would ever presume to assert a “technical definition” of a recession. There are too many variables which one must look at!
All that stated, Canada does have its economic problems. Most of them stem from the US. The rest of them stem from the global economic doldrums. Given the state of the world and the state of the US’ economy, Canada is doing pretty darn well. It would be better for Canada if PM Harper could get a little more cooperation from President Obama, but, he won’t. Sadly, Obama is an ideologue, and he’s at the opposite end from PM Harper. Rather than pursue the symbiotic relationship we’ve always enjoyed, Obama would rather cut his nose off to spite his face.
But, Obama won’t be president for long, and it’s very likely the next president will be much more receptive to, once again, pursuing the fine symbiotic relationship. It would be folly for the Canadians to insert a leftist statist such as Obama to lead their nation, as the US goes the opposite way.