http://www.lewrockwell.com/orig6/karlsson8.html
Why the U.S. Recession Is Here
Stefan M.I. Karlsson | May 5, 2008
The latest GDP numbers, that supposedly showed that real GDP expanded 0.6% in the first quarter of 2008 after having expanded at the exact same rate the previous month, was used by a number of economists, mainly supply-side Republican ones, to deny that America is in a recession. First and foremost among them was Larry Kudlow, along with Jerry Bowyer, whose book The Bush Boom Kudlow wrote the introduction of. The argument made is that since GDP supposedly still expands and since recession is supposedly defined as two consecutive quarters of falling GDP, this means that there aren’t no recession.
But as a matter of fact, both parts of this argument is wrong. First of all, recession is in fact usually not defined by two consecutive quarters of falling GDP. Although there were three quarters of falling GDP in 2000 and 2001, these declines were interrupted by quarters of rising GDP, so using the definition of two consecutive quarters of falling GDP there weren’t any recession in 2001. Instead, recession is usually declined as a broad based decline in economic activity, which specifically means falling industrial production, payroll employment, real disposable income excluding transfer payments and real business sales. This, together with some indicator of monthly GDP is how the National Bureau of Economic Research (NBER) define a recession.
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