Comments on: Recessions Often Begin With Positive GDP Data http://www.ritholtz.com/blog/2008/05/recessions-often-begin-with-positive-gdp-data/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Sat, 20 Mar 2010 18:57:36 -0400 http://wordpress.org/?v=2.9.2 hourly 1 By: Scott http://www.ritholtz.com/blog/2008/05/recessions-often-begin-with-positive-gdp-data/comment-page-1/#comment-86456 Scott Tue, 13 May 2008 16:19:09 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/05/07/recessions-often-begin-with-positive-gdp-data/#comment-86456 Barry, my man. I believe I erred in making an ad hominim attack re Kudlow in what had been my first and only post. This was made prior to the "asshat" email. Guilty as charged. Consider me chastened. Please let me stay in the playground and I'll be good. That said, as an old Merc guy, who came across Kudlow occassionally back in his Bear days: he was more fun in the 80s!! ;) Barry, my man. I believe I erred in making an ad hominim attack re Kudlow in what had been my first and only post. This was made prior to the “asshat” email. Guilty as charged. Consider me chastened. Please let me stay in the playground and I’ll be good. That said, as an old Merc guy, who came across Kudlow occassionally back in his Bear days: he was more fun in the 80s!! ;)

]]> By: Barry Ritholtz http://www.ritholtz.com/blog/2008/05/recessions-often-begin-with-positive-gdp-data/comment-page-1/#comment-86455 Barry Ritholtz Sun, 11 May 2008 11:59:50 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/05/07/recessions-often-begin-with-positive-gdp-data/#comment-86455 Thanks BobC. I dislike when the comment thread gets polluted with incredibly silly or ignorant comments. I like when people disagree and challenge my reasoning and logic -- but with data and intelligence, not idiocy. To maintain the intellectual integrity of the site, as well as to delete what looks like trolls, I will unpublish those comments that fail logic or econ 101. Thanks BobC. I dislike when the comment thread gets polluted with incredibly silly or ignorant comments.

I like when people disagree and challenge my reasoning and logic — but with data and intelligence, not idiocy.

To maintain the intellectual integrity of the site, as well as to delete what looks like trolls, I will unpublish those comments that fail logic or econ 101.

]]> By: BobC http://www.ritholtz.com/blog/2008/05/recessions-often-begin-with-positive-gdp-data/comment-page-1/#comment-86454 BobC Sat, 10 May 2008 14:27:31 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/05/07/recessions-often-begin-with-positive-gdp-data/#comment-86454 I'm surprised at that lack of logic displayed in many of the responses to this article. It's pretty straight forward. The premise is that recessions have not always had negative growth at their inception. The author then proceeds to provide empirical data that proves his assertion. That's it. Nothing more. He never actually states that we are in a recession or even that we will be in one soon. He only says that a +.6 growth in GDP does not prove we are NOT in recession. I’m surprised at that lack of logic displayed in many of the responses to this article. It’s pretty straight forward. The premise is that recessions have not always had negative growth at their inception. The author then proceeds to provide empirical data that proves his assertion. That’s it. Nothing more. He never actually states that we are in a recession or even that we will be in one soon. He only says that a +.6 growth in GDP does not prove we are NOT in recession.

]]> By: drop73 http://www.ritholtz.com/blog/2008/05/recessions-often-begin-with-positive-gdp-data/comment-page-1/#comment-86453 drop73 Fri, 09 May 2008 19:55:17 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/05/07/recessions-often-begin-with-positive-gdp-data/#comment-86453 This article addresses what has been the case in the past and attempts to find a similar pattern for today. GDP reports are backwards looking. What we should be looking for are signs of improvement or decline, such as whether there is a current increase or decrease in home prices from the mortgage crisis, or if banks have the current ability to balance their balance sheets with projected mortgage defaults to double in 2008 compared to 2007. We know the answer/outcome to these two questions, but somehow our most renowned economic advisors are telling us the problems don't exist. No matter how long we keep our heads buried in the sand, the mortgage debt and bad securities we've created is not going to just go away. If you treat houses like a commodity, don't be surprised when they behave like a commodity, and most people in the last 7 years bought high. This article addresses what has been the case in the past and attempts to find a similar pattern for today. GDP reports are backwards looking. What we should be looking for are signs of improvement or decline, such as whether there is a current increase or decrease in home prices from the mortgage crisis, or if banks have the current ability to balance their balance sheets with projected mortgage defaults to double in 2008 compared to 2007. We know the answer/outcome to these two questions, but somehow our most renowned economic advisors are telling us the problems don’t exist. No matter how long we keep our heads buried in the sand, the mortgage debt and bad securities we’ve created is not going to just go away. If you treat houses like a commodity, don’t be surprised when they behave like a commodity, and most people in the last 7 years bought high.

]]> By: Mike Milken http://www.ritholtz.com/blog/2008/05/recessions-often-begin-with-positive-gdp-data/comment-page-1/#comment-86452 Mike Milken Thu, 08 May 2008 14:15:32 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/05/07/recessions-often-begin-with-positive-gdp-data/#comment-86452 We believe the U.S. economy tipped into a mild recession in the first half of 2008. A severe correction in housing markets, oil prices that breached the one hundred dollars a barrel barrier, the weakening labor market, overextended consumers, and a continuing credit crunch have overwhelmed the underlying strength of export markets. The result will be a modest decline in overall economic activity. Our outlook calls for real GDP to decline at an annual rate of 0.6 percent in the first quarter of 2008, followed by a 0.9 percent drop in the second. We expect that the “advance” GDP report for the first quarter, released April 30 and estimating an increase of 0.6 percent, will be revised to show a decline. The good news is that Congress and the administration have reacted quickly, uncharacteristically so, to enact fiscal stimulus measures. The Federal Reserve, meanwhile, has aggressively cut interest rates and is supplying new liquidity to the financial system. These actions should mitigate the severity of the contraction and nudge the economy on an upward trajectory in the second half of the year, making this the mildest recession in the post-World War II period. However, the potential exists for other downside risks to precipitate a far more severe economic contraction. And by then it won’t matter to consumers, homeowners, investors, or businesses whether or not the National Bureau of Economic Research (NBER) defines the downturn as a recession—because it will certainly feel like one. We believe the U.S. economy tipped into a mild recession in the first half of 2008. A severe correction in housing markets, oil prices that breached the one hundred dollars a barrel barrier, the weakening labor market, overextended consumers, and a continuing credit crunch have overwhelmed the underlying strength of export markets.

The result will be a modest decline in overall economic activity. Our outlook calls for real GDP to decline at an annual rate of 0.6 percent in the first quarter of 2008, followed by a 0.9 percent drop in the second. We expect that the “advance” GDP report for the first quarter, released April 30 and estimating an increase of 0.6 percent, will be revised to show a decline.

The good news is that Congress and the administration have reacted quickly, uncharacteristically so, to enact fiscal stimulus measures. The Federal Reserve, meanwhile, has aggressively cut interest rates and is supplying new liquidity to the financial system. These actions should mitigate the severity of the contraction and nudge the economy on an upward trajectory in the second half of the year, making this the mildest recession in the post-World War II period.

However, the potential exists for other downside risks to precipitate a far more severe economic contraction. And by then it won’t matter to consumers, homeowners, investors, or businesses whether or not the National Bureau of Economic Research (NBER) defines the downturn as a recession—because it will certainly feel like one.

]]> By: Ivo http://www.ritholtz.com/blog/2008/05/recessions-often-begin-with-positive-gdp-data/comment-page-1/#comment-86451 Ivo Thu, 08 May 2008 08:31:50 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/05/07/recessions-often-begin-with-positive-gdp-data/#comment-86451 Hi Vlad, First, what Barry seems to argue is the fact that reported number is not negative, does not mean that it is not a recession. Second, you cannot compare data of 1950s with today's - the accumulated distortions and manipulations are just too high. If you adjust for that bias the data may look even worse than any data you have seen since the 1950s. Hi Vlad,

First, what Barry seems to argue is the fact that reported number is not negative, does not mean that it is not a recession.

Second, you cannot compare data of 1950s with today’s – the accumulated distortions and manipulations are just too high. If you adjust for that bias the data may look even worse than any data you have seen since the 1950s.

]]> By: Vladislav Iordanov http://www.ritholtz.com/blog/2008/05/recessions-often-begin-with-positive-gdp-data/comment-page-1/#comment-86450 Vladislav Iordanov Thu, 08 May 2008 07:21:41 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/05/07/recessions-often-begin-with-positive-gdp-data/#comment-86450 Please check your numbers. First you say that the 2001 Q2 final GDP reading was -1.6% but further down you say it is +1.2%. Both times you use it to show that your "theory" is correct. Do you fit the numbers to match your "theory" or your "theory" to the numbers? If you are arguing that we are in a recession, you should know that a reading of -20,000 non-farm payrolls change is not statistically significant from 0 which is unusual for the "worst recession since the Great Depression" as it is called by the left press. Usually you see numbers like -200,000 to -400,000 during recessions. If you go back to the 1950s, you can see monthly changes in seasonally adjusted employment of -1% which given the 137 million payrolls today will translate to 1.37 million lost jobs in a month. You have to look at the numbers as an aggregate and so far the GDP, non-farm payrolls, unemployment, payroll taxes, service industry growth doesn't point to recession. Probably slowdown. Regards, Vlad ~~~ <b>BR</b>: For 2001 Q2 (#3 above) those numbers include the subsequent revisions in 2004 (fixed above). Hence, we get yet a different number from the Advanced and Final releases. <i>But do not miss my point</i>: I am using the data to show that merely because Advanced GDP is positive does not preclude the possibility of a recession. Additionally, do not assume that recessions must have 2 consecutive quarters of negative GDP, as 2001 showed. I am not responsible for what the media or other economists say or do. I am using the actual data to show that the factual declarations of Mankiw, Wesbury et. al were wrong. Please check your numbers. First you say that the 2001 Q2 final GDP reading was -1.6% but further down you say it is +1.2%. Both times you use it to show that your “theory” is correct. Do you fit the numbers to match your “theory” or your “theory” to the numbers? If you are arguing that we are in a recession, you should know that a reading of -20,000 non-farm payrolls change is not statistically significant from 0 which is unusual for the “worst recession since the Great Depression” as it is called by the left press. Usually you see numbers like -200,000 to -400,000 during recessions. If you go back to the 1950s, you can see monthly changes in seasonally adjusted employment of -1% which given the 137 million payrolls today will translate to 1.37 million lost jobs in a month. You have to look at the numbers as an aggregate and so far the GDP, non-farm payrolls, unemployment, payroll taxes, service industry growth doesn’t point to recession.
Probably slowdown.
Regards,
Vlad

~~~

BR: For 2001 Q2 (#3 above) those numbers include the subsequent revisions in 2004 (fixed above). Hence, we get yet a different number from the Advanced and Final releases.

But do not miss my point: I am using the data to show that merely because Advanced GDP is positive does not preclude the possibility of a recession.

Additionally, do not assume that recessions must have 2 consecutive quarters of negative GDP, as 2001 showed.

I am not responsible for what the media or other economists say or do. I am using the actual data to show that the factual declarations of Mankiw, Wesbury et. al were wrong.

]]> By: kio http://www.ritholtz.com/blog/2008/05/recessions-often-begin-with-positive-gdp-data/comment-page-1/#comment-86449 kio Thu, 08 May 2008 06:20:55 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/05/07/recessions-often-begin-with-positive-gdp-data/#comment-86449 BR, +0.6% is obviously +-1% (or even more for quartarly estimates) uncertain, as analysis of NIPA revisions demonstrate and as BEA people say in their papers available at BEA site. Even after comprehensive revisions one can not be sure about real GDP growth rate. So, +0.6% and -0.4% (recession?) is esentially the same. BR,

+0.6% is obviously +-1% (or even more for quartarly estimates) uncertain, as analysis of NIPA revisions demonstrate and as BEA people say in their papers available at BEA site.
Even after comprehensive revisions one can not be sure about real GDP growth rate. So, +0.6% and -0.4% (recession?) is esentially the same.

]]> By: SocraticGadfly http://www.ritholtz.com/blog/2008/05/recessions-often-begin-with-positive-gdp-data/comment-page-1/#comment-86448 SocraticGadfly Thu, 08 May 2008 04:37:44 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/05/07/recessions-often-begin-with-positive-gdp-data/#comment-86448 "Positive GDP"? Please. As Kevin Phillips points out in his new book, those numbers have been finagled, including changing GNP to GDP, for more than 40 years. I don't for a minute believe we actually had "positive GDP" last quarter. “Positive GDP”? Please. As Kevin Phillips points out in his new book, those numbers have been finagled, including changing GNP to GDP, for more than 40 years.

I don’t for a minute believe we actually had “positive GDP” last quarter.

]]> By: Winston Munn http://www.ritholtz.com/blog/2008/05/recessions-often-begin-with-positive-gdp-data/comment-page-1/#comment-86447 Winston Munn Thu, 08 May 2008 04:06:47 +0000 http://thebigpicture.dev.wilder.ca/blog/2008/05/07/recessions-often-begin-with-positive-gdp-data/#comment-86447 "Can anyone tell me what per centage of the massive increase in consumer credit released today was credit card debt?" About 1200%, after securitization and being traded to the Fed for treasuries. “Can anyone tell me what per centage of the massive increase in consumer credit released today was credit card debt?”

About 1200%, after securitization and being traded to the Fed for treasuries.

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