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Monday, September 20, 2010

The Recession is Over!

Or is it?   NBER announced today that our recession ended in June 2009.

NBER panelist and the author of the macro text I use in class had this to say:
"At least half of them excoriate us for saying that the recession is over, But we are only saying that things started to get better in June 2009, not that times are good."

My question to Robert Hall would be, "What are these things you speak of?"  If you mean corporate profits and overall GDP, yes.  If you mean base wage levels, benefits, raises, or employment, then I would further ask:

"Can I have some of the dope you are smoking?"

I am one of those that thinks we need to examine how we 'call' recessions and expansions.  Or perhaps we should just stop using the terms altogether.  Just call it like it is: GDP is growing and benefiting some, unemployment is still very high and not really budging and it is hurting others....

The Federal Reserve Bank of Richmond sees huge benefits in maintaining the status quo:
"Recession dates are useful because they combine
a great deal of information into a single variable
reflecting an informed judgment that the economy,
broadly defined, was contracting at a certain point
in time." 

For me, the aggregation of such data points, which by themselves are just aggregates of other disaggregated data, means you lose sight of what's really going on.  You end up not making an informed judgement on the economy, but rather you lose sight of reality - such are the problems with the assumption of aggregation in macroeconomics.


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