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May 16, 2008 10:56 am US/Pacific

Saying The 'R' Word

QUESTION:   Most Americans see the housing crisis, soaring food and gas prices, slowing job market and say were in a recession.  Why does the government take so long to say the 'R' word?

ANSWER:  You are correct with your observation of soaring energy and food prices.  The unemployment has gone up slightly, but is still historically at very low levels.  However, the historical definition of a recession is two consecutive quarters of declining Gross Domestic Product.  However, the defining of a recession is actually much more detailed and is determined by the National Bureau's Business Cycle Dating Committee.  Typically, a recession is actually defined months after the recession has actually concluded.  The historical definition of two consecutive quarters of declining GDP has not been met.  The GDP in the fourth quarter of 2007 grew at .6%, and the GDP growth in the first quarter grew at .6%.  A recession is a normal part of a business cycle, and I would suggest that it is part of the health restoring process an economy must undertake periodically. 
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