Definition of Recession

Over the last few days you’ve probably seen the emphasis on the job numbers. I posted them on Friday. I was very tempted to write an entry with my thoughts on them, but then I saw everyone else was doing that. The bottom line is that everyone thinks we are headed for a recession. The job market was the last pillar holding up the roof (pun intended).

I believe a recession is coming too. I started expressing that opinion in October ’07 with the Peanut Butter and Pasta entry. But I also think a recession might not happen… technically.

For the lower and middle class in America, the next six months will offer few economic opportunities.  What usually correlates with a recession, job losses, paying debt, buying generics rather than names brands, will happen. The US lower and middle class will not improve their quality of life in 2008.

But the upper class might prevent it from being a recession by definition since a recession is technically a contraction of GDP rather than a growth of it. The upper class is still benefiting from tax cuts, corporate earning windfalls, and foreign investments. Wealth isn’t being shared. I’m not advocating for it to be either.

I’m advocating for the upper class to take some risks with their fortunes. If they hold onto their fortunes then surely recessionary symptoms will engulf the lower classes. If they put their money to work then it will benefit everyone and recession symptoms will be short lived.

Finally, if GDP is used for judging a recession then I think it needs a parallel measure that determines each individual tier – lower, middle, and upper class prosperity. 

Update (1-19-08): Thanks for Floyd Norris of the NY Times, here is the real definition of a Recession: “a recession is a significant decline in economic activity spread
across the economy, lasting more than a few months, normally visible in
real G.D.P., real income, employment, industrial production, and
wholesale-retail sales.”

Update – (12/1/08): The National Bureau of Economic Research is a group that declares such things as recessions, based on the items listed above.

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