If the economy is growing, why are we still talking about a recession?
Answer by Steve Wood BIO AND CONTACT INFO
QUESTION: Last week the government reported that the economy grew by 0.7% in Q2. Why are some analysts still talking about a recession? Doesn't a recession mean that GDP has declined for 2 or more quarters?
ANSWER: It is difficult to define a recession. A decline in GDP for 2 or more quarters is a handy rule-of-thumb but it is not an official definition. The determination of a recession is made a committee of the National Bureau of Economic Research, a non-governmental organization. They typically look for 3 things when determining whether a recession is/has occurred: depth, dispersion, and duration. For an economic contraction to be classified as a recession requires that it be deep, that it be widespread, and that it lasts for some time. Unfortunately, none of these terms are officially defined. So, whether the economy is officially in recession is a judgement call. However, the current situation does not seem to yet qualify as a recession. Although the manufacturing sector is clearly in in recession, the broad economy has yet to contract, so that the depth and dispersion criterion on not met.
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