NY Times; unemployment rate surges
According to the New York Times, the fact that the unemployment rate “surged” to 5% last week indicates we may already be in a recession;
The unemployment rate surged to 5 percent in December as the economy added a meager 18,000 jobs, the smallest monthly increase in four years, the Labor Department reported on Friday.
Economists viewed the report as the most powerful indication to date that the United States could well be falling into a recessionary downturn. Evidence of widening unemployment heightened anticipation that the Federal Reserve would further cut interest rates this month, perhaps by an unusually large half a percentage point, in a bid to prevent the economy from sliding into the muck.
Well, yes the unemployment rate rose to 5% in December, it’s .4% higher than it was a year ago. That’s hardly a surge. And it’s .4% lower than it was in October 2001 – the month after 9-11 attacks.
New York Times, characteristically misleads it’s readers with a faulty definition of what constitutes a recession;
“This is unambiguously negative,†said Mark Zandi, chief economist at Moody’s Economy.com. “The economy is on the edge of recession, if we’re not already engulfed in one.â€
A recession is typically defined as an extended period of at least several months during which economic activity shrinks and unemployment rises.
Investopedia (from the Forbes Company) defines a recession as;
The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP).
“Two consecutive quarters of negative growth” is a bit more precise than “an extended period of at least several months”. If we are “engulfed” in a recession, where’s even one month of negative growth?
The closest event to a recession we’ve had in the last decade happened at the end of President Clinton’s term and at the beginning of President Bush’s (according to Wikipedia);
The U.S. economy shrank in three non-consecutive quarters in the early 2000s (the third quarter of 2000, the first quarter of 2001, and the third quarter of 2001). Strictly speaking, the U.S. economy was not in recession during this period — the common definition being “a fall of a country’s real gross domestic product in two or more successive quarters.”
Those using a less traditional definitions of the term deem part or all of this period to have been a recession and there remains some debate over the start and end dates.
The New York Times must be using the same “less traditional definitions” to write their story. But then the media uses terms they don’t understand to describe a lot of things these days – especially when they’re trying to influence public opinion against Republicans during an election.
Like when James Carville pronounced “It’s the economy, stupid” in the 1992 campaign, although Clinton admitted two years later that his staff knew the economy was recovering and they were afraid to lose an important issue to The Truth.
Similar to the laws of gravity, the laws of economics are governed by simplicity. When the stock market indexes reach new highs, they’re due to come down. When unemployment reaches new lows, it’s bound to go up. When interest rates are at historic lows, they’re going up soon. How hard is that to understand? Record highs and lows are records for reason.
