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When is a Recession not a Recession?

By Brian | July 24, 2008 | Share on Facebook

This from last week’s Wall Street Journal:

Federal Reserve officials marked up their outlook for inflation and economic growth in their latest projections. But their estimates suggest little expectation that underlying inflation trends will deteriorate significantly through 2010.

At the June policy meeting, officials projected that the rate of economic growth by the end of the year would be between 1% and 1.6%, up from 0.3% to 1.2% in their April estimates. The 2009 outlook was unchanged, with officials expecting growth between 2% and 2.8%.

Fed officials marked up their inflation projections for this year, measured by the price index for personal consumption expenditures, to between 3.8% and 4.2%, up from the 3.1% to 3.4% seen in April. The outlook for inflation next year was 2% to 2.3%, up only slightly from the 1.9% to 2.3% from the April meeting.

Expectations for the unemployment rate, now 5.5%, was unchanged at 5.5% to 5.7%.

Translation:  in the coming months, the economy’s anemic growth rate is expected to increase, inflation is expected to remain high, and the job market is expected to remain relatively stagnant.

Here’s the thing:  increasing prices (particularly for food and fuel – two things everybody buys in one way or another) and the stagnant job market affect people directly in the pocketbooks.  Times are tough, especially for those on the lower part of the income scale.  This is a real problem that we should take steps to correct, whether it be tax policy, interest rate management, stimulus packages or anything in between.

But despite these problems, our economy is growing.  In other words, it may feel like a recession, but it isn’t a recession.  In still other words, things could be a lot worse.  The growing economy is what’s keeping the job market from falling apart, keeping wages stable, and probably keeping inflation from spinning wildly out of control.

All of the above isn’t particularly good news, but it’s probably a relatively non-controversial message.  That is, unless you happen to distinguish between “feels like a recession” and “is a recession” by using the term “mental recession” and tagging the people who keep calling it a recession “whiners.”  Then, it’s very controversial.  And, suddenly, both candidates (who are supposed to be pitching their economic plans to us) have to distance themselves from you.  Also, the various pundits and economic experts that pepper out national media lose the ability to analyze what you meant, instantly ignore your impressive resume when it comes to economic matters, and choose instead to characterize you as a nut-ball who suddenly and inexplicably lost his mind.

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