US Economy ≠ Recession
From today’s New York Times:
The gross domestic product grew at a 0.6 percent annual rate in the first quarter, the Commerce Department said on Wednesday, holding steady from the last three months of 2007.
The expansion, however slim, came as something of a relief to Wall Street, which had been bracing for a contraction. Many analysts have labeled the current downturn a recession, but the economy appears so far to have avoided the informal definition of two consecutive quarters of contraction.
No matter how much the FT and the Economist think they can editorially will this nation into recession, the numbers betray slowing growth, not a recession. At this point, given the 0.6% growth in GDP in the first quarter, the earliest the U.S. economy could actually hit “recession” would be September 30, 2008.
April 30th, 2008 at
Well regardless of the GDP, the middle class is clinching at pennies left and right.
April 30th, 2008 at
It is strange how FT and the Economist take a preternatural glee in crowing doomsday prophecies about the US economy. It is something the English have enjoyed doing since 1776. It would be funny to post a similar article from the seventeen hundreds next to a US GDP growth chart.
April 30th, 2008 at
Hey…the entire infrastructure of wall street and the mutual fund industry (which manage all our money) is set up to perpetuate bullish feelings about the economy. Just about the only people to profit from bearish sentiment are a very small number of shorters and the press. If it bleeds, it leads. The economy is not doing well. Forget about GDP, inflation adjusted earnings are down down down. We are sinking. Move to India!
To quote Jim Cramer: They have NO IDEA how bad it is. NO IDEA! NO IDEA!
April 30th, 2008 at
Yes it is true that “recession” has a technical definition meaning 2 straight quarters of negative growth and so far we’ve only had less positive growth. Fine, it’s not a textbook recession. How does that change the fact that jobs are being lost, debts are increasing, loans are becoming tighter and the housing market is dwindling? And in general people have (or believe they will have very soon) less expendable income. That means retailers and restaurants suffer. As Matt points out, the middle class is pinching pennies.
The same thing is happening in Spain, by the way. The housing market is having difficulties, food prices are soaring. One year ago I was paying 89 cents for a package of coffee; 48 cents for a litre of milk; 98 cents for a litre of beer; 49 cents for a packet of soup mix. Today those same items cost me 99, 66, 1.19, and 55.
April 30th, 2008 at
“Recession is when your neighbor loses his job, Depression is when you lose yours” Ronald Reagan.
Jason states:
“One year ago I was paying 89 cents for a package of coffee; 48 cents for a litre of milk; 98 cents for a litre of beer; 49 cents for a packet of soup mix. Today those same items cost me 99, 66, 1.19, and 55.”
Matt and I think that if you will ship us 1000 litres of that beer we can pay the shipping and the duty, and with that beer costing $8.00 a litre here we will be able to sell it at a nice profit ($1,190.00 per 100 litres vs $8,000.00 in NYC less whatever we don’t drink ourselves)
I think that smuggling is going to be a real growth industry in a little while, what with milk costing $3.87 per gallon (Nuts, its cheaper then gasoline) and bread at $1.28lb, and eggs at $2.18 per dozen.
Powdered milk may be the way to go if the shortages we can expect come to pass. Piracy may be revived. We may see a real Ragnar Danneskjold on the high seas. It may be a real growth industry.
I don’t think that anyone in the press is rooting for a really severe recession, they only want one severe enough so that the Republicans and their economic policies will be driven into the wilderness. I think 40 years in the wilderness would do them a world of good.
By the way Jason, when will you be coming back to the States?
May 1st, 2008 at
I actually didn’t get to finish my post because I had to leave quickly.
I was going to close by saying that salaries have not increased in the last year. English teacher salaries are exactly the same. Although I do quite well with a base salary of 750 euros in the academy (supplemented by other classes), most people do not earn that much for regular jobs in retail, supermarkets, restaurants. Most people I talk to are quite impressed with 750 euros a month. So while my food prices appear incredibly cheap compared to New York (or Dublin where I recently visited) they are on par with the local salaries (I also shop in THE cheapest supermarket where they have about 2 1/2 people working at any given time and customer service means making the customer clean up when they accidentally knock over a bottle of wine). In the normal supermarkets prices are about 5 percent higher and in the big El Corte Ingles supermarket prices can be anywhere from 10 to 400 percent higher (a kilo of flour is 25 cents in my store and 95 cents in El Corte Ingles - guess where I don’t shop).
Gas here is just over 1 euro a liter which works out to be nearly $6 a gallon.
Joel, I’ll be home for 6 weeks at the end of the summer. Will be returning to Seville for another school year while Sandra finishes her psychology degree. Beyond that we’re trying to make plans that may involve a year in the US if Sandra can get a scholarship or a job. Hmmm, she speaks 5 languages (fluent in German, Spanish and Italian, conversational in English and French) and will have two university degrees. Think she’ll have trouble getting a job?
May 1st, 2008 at
NYTimes:
For Europe’s Middle-Class, Stagnant Wages Stunt Lifestyle
May 1st, 2008 at
Except that vacations to New York (and the US in general) have probably increased given the low value of the dollar against the Euro.
The other thing I’m concerned people will start cutting back on is English classes which is where I earn my money.
May 1st, 2008 at
Thanks Josh. I blame the assault on the European dream on Republican economic policy. Just like I blame increasing global food costs and soaring commodities prices. It’s been great voting for the party that rules over all. But since everything is also my party’s fault, I guess I’ll have to go off and live in the wilderness for a bit.
May 1st, 2008 at
Certainly PART of the cause of increased food prices is the ridiculous practice of giving subsidies to farmers who sell their food for fuel instead of as food. So farmers are getting a better price to sell corn fuel than corn food. This creates a shorter supply of food, hence raising the prices. This has had no effect on reducing dependence on oil and no effect on reducing the cost of fuel.
By the way, governments do the same stupid crap in Europe.
May 1st, 2008 at
I agree with you Jason. Food subsidies are bad news. I’d like a system by which American and European governments eliminate food subsidies and food import and export taxes.