But don't call it a recession

Markets are skidding across much of the globe as investors absorb the bankruptcy filing at Lehman Brothers Holdings Inc. and Merrill Lynch & Co's's forced sale to Bank of America Corp. for $50 billion in stock. And perhaps most ominously, American International Group Inc. is asking the Federal Reserve for emergency funding. The world's largest insurance company plans to announce a major restructuring Monday. (WTOP)

In yesterday’s Washington Post, there was an editorial from a “respected” economist who put forward the argument that the economy is strong, not heading for a “recession” and in fact has grown by an impressive 3.3 percent in the second quarter. I guess he wrote the article in late August instead of mid-September.

Yes, technically the United States and many other countries are not in an economic recession, which is defined as two quarters in a row of declining GDP. But is that a realistic measure? Some would argue that it is, while those that are not tenured professors and have to deal with the ramifications would argue that the US is at least in the grips of a down turn.

Some examples: Unemployment is up in industries that are “luxuries,” such as restaurant and retail and most retail operations are seeing a downturn in sales. This is a subtle sign of a down turn. IT spending is expected to decline in the third quarter and be stagnant in the fourth, while hiring is expected to go negative in the fourth quarter. Negative. That mean people that keep IT systems running will be put out of work. Very few organizations have enough employees to keep their systems running to “lay off” anyone. Wages are not increasing, despite increasing costs due primarily to fuel. Of course, this mean that inflation is being held in check, at least economically, but at the end of the day, it means people have less to spend, even on things they need, such as gas to get to work. At the end of the day, people spend the day at home instead of going out. This is not a recession.

The final slap in the face is the federal takeover of BearSterns, before they then sold it to someone else, the takeover of Freddie and Fannie and finally this weekend, the failure of two more financial houses. But this is not a recession. The failures of course are blamed on bad loans. Stupid banking practices and an over inflated definition of value of the home and the goods and services therein. But we are not in a recession. How many people are going to lose their jobs over these turnovers? How much less will they be paid? How much more money will be “taken out” of the economy? Major newspapers are cutting staffs at incredible rates, also increasing the amount of money coming out of the economy. But this is not a recession.

If it is not a recession, then please explain to me what it is, because it is not a growing or even a healthy economy.