Economy Grows by 0.6 Percent in First Quarter

My first thought upon reading that, the U.S. economy grew at 0.6 percent for the first quarter was Woohoo! We’re not technically in a recession.

Matt Yglesias had a similar thought and uses it to “once again remind people that the big sources of uncertainty in the general election have to do with objective reality rather than candidate-attributes or campaign tactics. That stuff can matter, but the evidence suggests that it doesn’t matter as much as the fundamentals, and the fundamentals are, in a sense, unknowable.”

While I think that’s mostly right, it also causes me to slightly rethink my initial reaction to the economic news. That is, the economy is what it is. The numbers probably don’t matter much.

Whether aggregate growth is minus 0.6 percent or plus 0.6 percent really makes very little difference in most of our objective realities but, technically, the former has us edging into recession while the latter is merely lackluster. Further, as we saw in the 1992 election, when incumbent George H.W. Bush was being excoriated for, correctly, pointing out that we weren’t in a recession — and then we got adjusted figures after the election showing that we were in fact in the beginning of an economic boom — objective reality probably doesn’t matter much anyway. Rather, it’s the public perception of reality that matters.

With gasoline prices soaring, worries over the housing market, and so forth, most people think the economy is in bad shape. Whether the release of new figures describing the economy will turn around that perception, I don’t know.

FILED UNDER: Campaign 2008, Economics and Business, ,
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. yetanotherjohn says:

    Showing some economic growth isn’t going to turn around perception. There is a perceived advantage on the left to show a declining economy. So the MSM will ignore this and push the “American’s having to sell off possessions to pay bills” anecdotes to make us look like we are in the midst of a depression.




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  2. legion says:

    Perception isn’t just made up out of whole cloth – it’s got some basis in reality, even if it isn’t a perfect mirror. If this slight increase in GDP is a function of (like Bush’s tax cuts) an improvement in the positions of the wealthiest few decimals of the population, then the perception is largely correct – this _isn’t_ indicative of growth for the majority of the populace.




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  3. Dave Schuler says:

    The NBER doesn’t define recession that way. They define it as a relation between output and business activity and by that measure the economy can continue to grow and we can be in a recession.




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  4. Whether aggregate growth is minus 0.6 percent or plus 0.6 percent really makes very little difference in most of our objective realities but, technically, the former has us edging into recession while the latter is merely lackluster.

    Might I suggest that the use of the word objective in this context is incorrect. This is almost the definition of subjective the way you have used the term here. Incidentally, the word recession has a definite meaning in this context, i.e., two consecutive quarters of declining GDP. It would be nice if there were even one quarter of declining GDP before the word recession was thrown about so casually.

    Further, as we saw in the 1992 election, when incumbent George H.W. Bush was being excoriated for, correctly, pointing out that we weren’t in a recession — and then we got adjusted figures after the election showing that we were in fact in the beginning of an economic boom — objective reality probably doesn’t matter much anyway. Rather, it’s the public perception of reality that matters.

    In politics, perception is reality, until reality can no longer be ignored. Unfortunately, the cost of rectifying the difference between reality and perception seems to grow exponentially so that once it can no longer be ignored the pain becomes rather severe. There is still no such thing as a free lunch, and eventually the piper must be paid. Acting as though we are in a recession when we aren’t can easily become a self-fulfilling prophecy.




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  5. James Joyner says:

    This is almost the definition of subjective the way you have used the term here.

    What I mean to say is that there is no measurable impact on most of our daily existence from such a small difference. While the number may be an objective fact based on how we calculate these things, there’s neither a subjective (perceptual) or even objective (meaningful, factual) impact on how we live.




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  6. glasnost says:

    Barry Reitholz argues that if inflation was correctly accounted for, we’d be in negative growth. Essentially, we’re counting inflation as growth, making growth larger and inflation smaller. Smart guy.




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  7. anjin-san says:

    Look the economy is going to be fine. All we have to do is spend a few hundred billion more in Iraq. Then we can close some hospitals, maybe lay off some teachers and firemen and cops. Perhaps cut back on programs that provide meals for low income senior citizens. All will be well. And if it ain’t just blame the Democrats. Thats leadership.




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  8. Beldar says:

    For people who like to communicate with precision, it’s important that words retain their meaning. “Recession” is a word with a precise meaning, and according to it, we were not in one during the first quarter of 2008.

    People who desperately want to plug particular sets of talking points for political purposes will seek to blur those precise meanings. Thus you have Sen. Chuck Schumer (D-NY) lying through his teeth in arguing yesterday that for 90% of America (after we exclude the top 10% of income earners), we’re already in a recession. This is like saying, if you’re a woman who’s recently had sex, you’re 90% pregnant.

    If it’s your job that has disappeared, then you aren’t in a recession, you’re in the Great Depression. Except that that term, “Great Depression,” had a real meaning too, and it’s a terms whose only legitimate meaning was with reference to a national aggregate. It’s insulting to anyone who lived through the Great Depression to suggest that a single layoff, a single lost job, is comparable. But that is of small comfort to the fellow who’s home is foreclosed upon and who’s facing eviction.

    There are people whose homes are foreclosed upon, and who face eviction, even during boom times.

    Hillary claims that she’s “Paulette Revere,” riding to proclaim that the Recession is upon us. That’s a lie, told for political purposes. Obama claims that we’re “teetering not just on the brink of recession, but something worse,” and that’s a lie, also told for political purposes. McCain admits that we’re in a recession because he doesn’t have the intellectual discipline and — in this instance — the political guts to insist on honest use of defined economic terms.

    So: Against that backdrop, I thank you, Dr. Joyner, for your honesty and precision. Would that others followed your example.




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  9. M1EK says:

    Beldar, Barry Ritholz at The Big Picture makes a compelling argument that if we weren’t constantly futzing with the definition of inflation, we’d already have had our 2 quarters of negative growth.

    http://bigpicture.typepad.com/comments/2008/04/gdp-inflation-r.html




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  10. Beldar says:

    To the contrary, that article argues in favor of futzing with the existing, and long-used, method for factoring in inflation, in a way that (says its author) would be “more realistic” and therefore produce the desired result of reporting a recession.

    But the reason the word has precision is based on apples-to-apples comparisons, without constant futzing. If you change the definition for the current period, you either have to also change the definition used to describe previous quarters, or admit that you’re comparing apples and oranges.




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  11. M1EK says:

    Beldar, the point is that the metric has changed since the times when we had more frequent and deeper recessions. It’s also completely reasonable to point out that a GDP deflator built on an inflation rate of 4% in today’s economy is very unrealistic.




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