Paul Krugman makes a very pertinent point today in his blog: the technical definition of recession doesn’t really matter to Americans. What really matters is not how the economy is labeled, but whether or not Americans can fill their cars with gas, put food on the table, buy clothes for their kids, pay their bills — including their mortgage, and hold down a steady job with a well-paying wage.
In academic terms, a recession is defined as a “few” months of consistent pessimistic economic activity spread throughout the economy. This is normally visible in a convergence of negative GDP, income and employment levels, retail sales, and industrial production.
When all these elements converge, there is no disputing that the economy is going down the tubes. But Americans have been singing this song now for months, even years, and they don’t give two cents about dictionary definitions or Wall Street economists — they want relief. Other economic indicators tell a more revealing story:
— The unemployment rate has climbed to 5.1 percent and is expected to move higher in the coming months.
— Consumer spending and retail sales, which account for 70 percent of the US economy, have fallen steadily, scraping lows unseen in more than seven years.
— Home foreclosures have topped the charts, as a record 18.6 million U.S. homes stood empty in the first quarter of 2008.
— Consumer confidence levels, which record popular perceptions on inflation, the job market and the economy in general have hit bottom. The overall number has reached its lowest point since the 2003 invasion of Iraq, while inflation expectations are the highest they’ve been since Hurricane Katrina.
— The share of consumers planning to take a vacation in the next six months has plummeted to a 30-year low.
So when the Department of Commerce announces that the GDP has increased by a meager 0.6 percent in the first quarter of 2008 — signifying that the economy may not technically be in a recession — Paul Krugman asks: “Who cares?”