Now I Understand

Apparently the guild rules on saying “recession” only apply to the United States, because Fallenmonk and Susie Madrak both noticed a James Quinn article in the Telegraph [UK] about the Merrill Lynch economist who used the “magic word”: “David Rosenberg, the bank’s chief North American economist, argues that a weakening employment picture and declining retail sales signal the economy has tipped into its first month of recession.”

I also found the first line of the article interesting: “The US has entered its first full-blown economic recession in 16 years, according to investment bank Merrill Lynch.”

Essentially he is saying that that the supposed “recession” that Clinton left for the Shrubbery wasn’t, in fact, a true recession under guild rules, because 16 years ago, 1992, the President’s last name was Bush.

John W. Schoen, Senior Producer at MSNBC provides the official guild rules in: Aren’t we already in a recession?

We pick our words carefully, and the word recession has a very specific meaning. Though popular definitions vary, the term generally refers to a period of more than a few months of declining gross domestic product. Economic conditions in some regions of the U.S. (especially in the industrial Midwest) and some industries (like housing) already appear to be headed in reverse. But a national recession can’t be confirmed until the economic data show that the overall economy is in decline. (Further, economists, academics and investment analysts have, since World War II, relied on the National Bureau of Economic Research, a private research group, to provide the “official” timing and severity of recessions.)

Who knew that the “National Bureau of Economic Research” owned a trademark on recession™? I guess I should be talking about an “economic downturn” to avoid problems. I note that while he claims “a very specific meaning”, his definition is a bit vague and unsatisfactory.

The BBC also weighs in on the Merrill Lynch report: Recession in the US ‘has arrived’

Its [Merrill Lynch’s] view is controversial, with banks such as Lehman Brothers disagreeing.

But a reserve member of the committee that sets US rates warned that it could do little about the below-trend growth expected in the next six months.

“I am concerned that developments on the inflation front will make the Fed’s policy decisions more difficult in 2008,” Charles Plosser, president of the Federal Reserve Bank of Philadelphia said.

He was referring to the problems faced by the US Federal Reserve, which might want to cut interest rates to avoid a recession, but is worried about inflationary factors such as $100-a-barrel oil.
…

But NBER [National Bureau of Economic Research] president Martin Feldstein denied Merrill’s claims.

“I think we’re not in a recession now,” he told CNBC.

“But I think there is a serious risk that it could get worse and we could see an actual downturn,” he added.

Merrill said that the current consensus view on Wall Street that there is a good chance of avoiding a recession is “in denial”.

It also objected to the use of euphemistic terms for the state of the economy.

“To say that the backdrop is ‘recession like’ is akin to an obstetrician telling a woman that she is ‘sort of pregnant’,” the report said.

Methinks ’tis time for the Black Knight sketch from Monty Python and the Holy Grail – “It’s only a flesh wound” . Who knew economists working on Wall Street could be snarky?