The R word … it’s official now

As you’ve probably read, the recession is finally official. The National Bureau of Economic Research (NBER), a private group of scholars, called the recession today. The business cycle gurus confirm that economic activity peaked in December 2007 and has been going in the tank ever since.

As an old Econ major I try to be scrupulous with use of the word recession in writing investor reports or presentations for clients.

My problem with the R word is that it actually has a meaning, which ties back to data. A recession isn’t just a case of indigestion in our business, but a specific change in the macro numbers. We used to say a recession was two consecutive quarters of decline in Gross Domestic Product, although NBER now uses a more complex set of metrics.

My peeve is that too many media folks are eager to drop the R word into their stories about a crisis in whatever they’re writing about. Politicians who stand to gain by painting a bleak picture also love the R word. And some business executives like to declare they are simply victims of a recession, whether or not the R word applies by objective measures.

But now it does apply. The official arbiters have declared, somewhat after the fact, that these folks are all correct in deploying the R word to describe what ails us. And we can use it in investor reports – although, let’s try not to blame all the consequences of past decisions on the R word.

The good news, you might say, is that we’ve already been in this recession for a year, according to NBER. So how ever long it lasts, the first year has passed and we’re that much closer to recovery. Wahoo.


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One Response to “The R word … it’s official now”

  1. Jason Says:

    According to Keynes, the root cause of an economic downturns is an insufficient aggregate demand. When the total demand for goods and services declines, businesses throughout the economy see their sales fall off. Lower sales induce firms to cut back production and to lay off workers. Rising unemployment and declining profits further depress demand, leading to a feedback loop with a very unhappy ending.

    90% of the time you can make statistics show whatever you want 50% of time

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