Regarding myths #3 and #5, I think there is a big problem in the media and elsewhere with terminology. The "official" definition of a recession is based on GDP growth, which usually rebounds very quickly. Hassett seems to have this definition in mind, like most business-oriented conservatives, whereas you are more concerned with unemployment, like most people in the country.

The high unemployment reached around 1982 was apparently the result of several recessions (1970, 1974 and 1980-82, which was itself two separate official recessions) in a 12-year period. Unemployment did not fully recover in between. Average GDP growth through that period was actually higher than since.

There should be a better definition of recession which takes employment into account, or maybe a different term should be used when there is a downturn, such as "economic pain and suffering index".

I was under the impression that suicide rates rise with the rising unemployment during recessions. Even if that does not happen in general, I think it did during the 1982 recession, which was marked by a lot of permanent layoffs leading to the dreaded structural unemployemnt. I have also read that spousal abuse rates also rise during such periods, although the 1982 recession may have also been worse than most for that.

Regarding Myth #2, I'm surprised that you didn't comment on the phrase "Influential economist Donald Luskin."

Also, skeptonomist, the official definition of a recession is whatever the NBER says it is. Cf. http://www.nber.org/cycles/recessions.html

You may be thinking of "two quarters of negative GDP growth" which is a rule of thumb but not the official definition.

Andy,

as far as Luskin, i was trying to be polite. I thought it was just best to ignore that one.

Dean,

I'd be interested in your commentary on the following excerpt from that WaPo piece:

"In terms of duration, the average recession since World War II has lasted about a year. The past three recessions -- in 1981-82, 1990-91 and 2001 -- lasted about a year as well. One factor that has clearly not helped is government discretionary fiscal policy, like the economic stimulus packages currently being considered on Capitol Hill. You might think that the brilliant postwar discoveries of economists would have provided tax medicine to stop recessions in their tracks. In an exhaustive study, however, Romer and her husband, David, found that fiscal measures such as temporary tax rebates and government spending increases have failed to push the economy out of recession because they have been too small or too late, or both."

1) Do you consider the above to be valid (completely or partially, and if the latter in what ways yes vs. no)?

2) If yes to #1 (partly or completely) are current fiscal policy measures under consideration likely to have better results in terms of effectiveness (degree to which they mitigate or shorten recession) and efficiency (impact per dollar lost to the Treasury)?

"...the official definition of a recession is whatever the NBER says it is."

OK, so what I am referring to is what is commonly shown by the media, and evidently also by the Fed and other government agencies in their graphs - that is the typically gray bars which usually last only a couple of quarters.

Since Dean Baker has been warning that we will have a housing crisis "next year" for the past four years, it isn't surprising that he insists we are in a recession before any data is out.

Hasset is correct about recent recessions. The 81/82 recession caused pain. The 91 recession was milder, with less pain. And the 00/01 recession was a slump which just grazed zero growth.

We are probably in the first 1% recession. Unemployment near historic lows at 5%.

With 198 years under my belt, I have a little perspective:

"Step away from the ledge of your financial building!"

oops... both Hassett and Baker are wrong.

There is a reason we used to call recessions in the late 1800s "panics." But recessions have been milder since the 1981 recession.

It is unlikely that the US ever records two quarters of negative growth again. It hasn't for 16 years.

Here's a St. Louis Fed chart which shows what I was referring to about the official definition of recession:

http://research.stlouisfed.org/fred2/series/UNRATE

This uses the official NBER definition - if the NBER uses unemployment apparently they are only considering rapid rate increases.

Also, the stair-step effect of recessions on unemployment applies in 1949-1961 as well. In fact, during this period (WW II to present) it would seem that attaining a low level of unemployment depends on a fairly long period (8 yrs+) without significant recessions. The disparity between unemployment and GDP growth also occurred in the Great Depression. When the economy did hit bottom in 1933, the rebound in GDP was very rapid. In terms of GDP the economy was fully recovered before WW II, but there were still lots of unemployed.

I don't think this is just a semantic matter. Why should the official definition of recession essentially ignore the duration of high unemployment?

Paul Krugman also discussed the disparity on his blog, but only in reference to the 2001 recession - it is really a general phenomenon.

Gladstone's and Anonymous' comments show why we still have recessions - overconfidence, leading to bubbles. There is a historical pattern of bears calling market crises or recessions unsuccessfully until no one pays any attention to warnings.

On Myth #4. It's possible that's true in most recessions. (The Cuban Ministry of Health reported that deaths from diabetes and heart disease declined during the crisis of the early 1990s there, as people were forced to cut back on food and had to walk or bike to work.)

In the present period, however, the stresses of the foreclosure crisis has already brought about an increase in domestic violence in affected communities. That can't be good for women's health.

The NBER's definition of recession:

http://www.nber.org/cycles/recessions.html

refers only to the period of economic decline. According to this definition the Great Depression ended in 1933. This is fair enough in a technical sense, but it is not the perception of the public or economists either, I would think. What most people mean when they talk about a recession or depression is the entire period of sub-long-term-trend growth and employment - and GDP growth returns to trend faster than employment.

Note also (the Fed employment graph) that in the two recent "minor" recessions unemployment reached a peak significantly after the official end of the recession.

Hassett uses his piece to refute 5 "myths" about recessions.

Why listent to this BOZO? He predicted 36,000 DOW in his 1999 book. I guess if we wait around long enough, it might happen, by inflation if nothing else.

But *really*, don't you think it's kinda silly to turn to this "expert"??

El Viajero,

good question, the Post presumably didn't think it was silly.

What is the point of economists like Baker calling a recession every single year since the last one?

Krugman argued from 2003 to 2006 that the U.S. economy was about to face a huge crisis. Last year, he admitted his prediction was overly pesssimistic.

Hassett never said when the DJIA would reach 36,000. But if the DJIA is still around, it will reach that within 15 years.

gladstone wrote, Since Dean Baker has been warning that we will have a housing crisis "next year" for the past four years, .../i>

That's silly.

Apart from whether Dean actually said "next year," it's notoriously difficult to call the top of a bubble. Failing to do so doesn't detract from the point that certain people (like Dean) saw the bubble for what it was, and others didn't.

gladstone wrote, Hassett never said when the DJIA would reach 36,000. But if the DJIA is still around, it will reach that within 15 years.

LOL! That's a laughable attempt to rehabilitate a ridiculous book.

Not to mention the fact that the book had serious conceptual flaws, e.g. a form of double counting of profits.

gladstone wrote, Unemployment near historic lows at 5%.

Unemployment isn't a complete picture, because it misses people who are not counted as in the labor force.

Employment/pop provides a fuller picture.

Krugman has an recent blog post on that.

actually, the authors of Dow 36,00 were very explicit that they meant the Dow's proper valuation at the time they wrote the book (1999) was 36,000.

From the 1999 Glassman and Hassett classic Dow 36,000, page 22:

"The Dow should rise to 36,000 immediately, but to be realistic, we believe the rise will take some time, perhaps three to five years."

(Buy your own copy on Amazon for 83 cents. Maybe the book is undervalued too?)

Thanks Ben,

that's the quote that I was thinking of.

Dean Baker has said that housing prices would plummet "next year" every year since 2003. He has warned of recessions as often. If you say every day it will rain, eventually you might get some sprinkles.

At least Hassett will be correct that the Dow will hit 36,000...

...Unlike Krugman who claimed for years that the U.S. would collapse into a banana republic.

And yes, the current 5% unemployment rate is lower than 7% twenty years ago.

gladstone wrote, Dean Baker has said that housing prices would plummet "next year" every year since 2003. He has warned of recessions as often. If you say every day it will rain, eventually you might get some sprinkles.

Thank you for showing you can't refute the point that Dean called the housing bubble, while many other gurus didn't.

At least Hassett will be correct that the Dow will hit 36,000...

Thank you for showing you can't refute the commenter who pointed out that Hassett actually put a date on his claim.

And yes, the current 5% unemployment rate is lower than 7% twenty years ago.

Thank you for showing you are unable or unwilling to address the question of the trend in the employment to population ratio, and that you likely don't understand the meaning of "not in the labor force."

Dean Baker kept saying there would be a housing crisis "next year" since 2003. He has similarly claimed a recession is right around the corner for about as many years.

But neither has come to pass as of January 2008.

We still don't know we are in a recession and housing prices have not "collapsed" as Baker kept insisting they would for years.

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