Saturday, January 31, 2009

Recession: The Sky is Not Falling

So we are in a recession ... What’s the big deal about that? This country goes into recession on an average of about every six years, and this one is right on schedule.

The biggest difference in this recession and past recessions is the Lame Stream Media (LSM), or perhaps the LEFTIST Media would be a better description since they have been in the tank with the Left for the better part of 15 years. All we have heard during this recession is DOOM and GLOOM, which we did not hear in any of the eleven (11) previous recessions this country has experienced since WW2. This time, the media has gone bonkers with left wing propaganda over this recession. If one actually takes time to look at the real raw numbers, this recession is actually a bit better than the earlier ones.

Now I’m not trained on the kinds of numbers the economists use to show just what makes a recession. And by the way, ninety-nine and forty-four one hundredths percent of our “leaders” aren’t either. Therefore, one could say that I know about as much as those in leadership in this country. If the truth were known, I may know a bit more since I am at least willing to do some reading rather than just taking some biased figures fed into the reports by those who want to spend a bunch of money to satisfy political debts and maintain power. I have read numbers from the WSJ, the NYT, and about a half dozen other business journals and magazines. And yeah, even that leftwing rag has posted some numbers, although they then covered up the real meaning with their typical doom and gloom. I tried to figure out a way to put them all into one nice list that would explain how this recession is a typical recession, not “the-sky-is-falling-and-we-are-going-into-depression-next-week” reports that we hear most of the time.

Then I ran across an article by Randall Hoven. Now I don’t know Randall Hoven from Jack, so I decided to see who Randall Hoven was. Is he an economist, a lawyer, or what? To my elation, I discovered that he is neither, which gave me a bit of hope that this guy might just be a smart guy who understand math a heck of a lot better than I. Yep, he does. The guy is an engineer, you know those guys who are plotters and never get in a hurry to do anything until they have the facts together. His education was impressive, at least to me. He has an M.S. in Systems Science & Mathematics, from Washington University, 1985, and before that he received his M.S. in Electrical Engineering, Johns Hopkins U., 1982, with honors. Not bad when it comes to arithmetic learning in my book. Anyhow he came up with some facts and figures that, I am happy to say, line up with a lot of other sources as well. In fact, he even furnished a list of his sources, which is more than the so-called leadership has furnished us in their attempt to sell us on this Spending Plan disguised as a Stimulus Plan. It is actually nothing more than a payback plan to groups and one in hopes of remaining in power in order to get more money from these same groups to stay in power to get more money to ... you get the idea.

Here is what Randall came up with:
The country had a decline of 3.8% culminated in the 4th quarter for the annual pace, this after a decline in the 3rd quarter. That makes the legal definition of “recession” two consecutive quarters of shrinking real GDP somewhat factual. The media, of course, made this to look like “the sky is falling” which suited the leaders in DC just fine because now they could pull the transfer of a lot of borrowed money to their special groups and make it look like they were doing something good for the country.

So if we look at the real numbers, first off, the "annual rate" of 3.8% shrinkage is what we'd get if that same one-quarter pace continued for four quarters. What actually happened was that GDP shrank 0.1% in the 3rd quarter and 1.0% in the 4th, for a combined loss of 1.1% over two quarters. Through all of 2008, the real GDP shrank just 0.2%, because the economy actually grew in the first half of the year. So far not bad and the “sky is not falling.” To date in this recession, and it is okay to call it a recession, real GDP has shrunk 1.1% from its peak, and non-farm payrolls has shrunk 1.9% from its peak. How do these numbers compare to previous recessions?
The maximum drop in real GDP for the previous 10 recessions, peak to trough, ranged from 0.4% to 3.8%, and averaged 1.9%. So far, it has dropped 1.1% in this recession.

The duration of GDP shrinkage, peak to trough, ranged from one quarter to five quarters, and averaged 2.4 quarters. So far, our recession has two quarters of negative growth.

The maximum drop in non-farm payrolls ranged from 1.3% to 5.2% (1949), and averaged 2.7%. So far, payrolls dropped 1.9% in this recession.

The duration of payroll shrinkage has ranged from 4 to 30 months, and averaged 13. So far, payrolls have shrunk for 12 months in this recession.

The peak unemployment rate ranged from 6.1% to 10.8%, and averaged 7.5%. The latest number for the current recession, December 2008, was 7.2%.

Since World War II, we've averaged a recession about every 6 years, start to start.
After looking at these numbers, would one be able to actually declare that “the sky is falling”? Actually, the numbers, like most numbers dealing with money, contain good news and bad news. According to Randall, this is what it means:
The good news is that our current recession is nowhere near unprecedented. In fact, it is better than the average recession in all measures above: real GDP, non-farm payrolls and unemployment rate. In fact, you could say it is a typical recession. It even started about six years after the last one.

The bad news is that this recession is probably not over. If this becomes an "average" post-WWII recession, our GDP will fall another 0.8%, in this quarter (1st of 2009) before it starts growing. And payrolls will shrink another 0.8% over the next month or so, before growing again. And unemployment will peak at 7.5%.

If this recession matches the worst of the previous 10, our GDP will shrink another 2.7% going into the fall. Payrolls will shrink another 3.3% for at least another year, and unemployment will peak at 10.8%.

So simply going by averages, this recession should end this year, maybe even in this quarter or the next. If things go bad, or no worse than in the last 60 years, we might not pull out of it until late this year, with lousy employment figures lagging into 2010.
After all of this, remember that none of the previous recessions was ended by the government spending a trillion dollars. Our current deficit is projected to be 7% of GDP or more. The deficit never exceeded 6% of GDP in any of the previous 10 recessions, or at any time since 1946. That projection, folks, is the result of trying to spend your way out of recession. So, as I have said before, when you are in a hole, STOP DIGGING. Sooner or later that hole is going to get so deep that what you are trying to shovel out is actually just falling back on top of you. And if you have any common sense, you will understand that you are soon going to bury yourself. Unfortunately, those in “leadership” in this country haven’t figured that out yet. Have you?


Data Sources:
Unemployment data came from the Bureau of Labor Statistics: http://www.bls.gov/. Click on "historical tables" under unemployment rate.
GDP and payroll data came from Bureau of Economic Analysis and the Bureau of Labor Statistics via the St. Louis Federal Reserve's Economic Data -- FRED: http://research.stlouisfed.org/fred2/, specifically Series GDPC96 and Series PAYEMS.

8 comments:

Faultline USA said...

Democrats don't want it to get around that the sky isn't falling. They are "banking" on a falling economy!Yes pun is intended. How else can they make repressive socialism permanent???

Ticker said...

"How else can they make repressive socialism permanent???"

True, but some folks know the truth and more are learning. The numbers who felt this was necessary have fallen daily since this mess began. Look for it to fall further and hopefully if for no other reason but to pander to votes the course will change.

Mtnrambo said...

I'm not real good with expression... I know what I mean but have a hard time putting it into words most people can agree with...

So, I'll tell a story...

I was at the Ford garage getting my company truck worked on... while waiting, I thought I'd venture out and around and look at the new vehicles... I don't need a new one and am certainly very happy with my Daimler/Chrysler and GMC vehicles...

I came upon a 2009 Shelby GT 500 Mustang in the showroom, last year, this car was $50-60K... drive home sticker was $34K... more to my budget if I wanted it...

Salesman told me " now is the time to buy, never been better !!! " pure BS !!! said a credit score of 720 was needed to even put IN the application for credit... LOL !!!

Same thing happened to the Real Estate poeple, and rightfully so... the price gouging got way out of hand...

Things got a way of coming around... the COST OF GREED hurts us all...

Ticker said...

"the COST OF GREED hurts us all..."MtnRambo.

Exactly what got us to where we are. Couldn't have said it better if I tried. Seems folks we have running this country just don't understand this simple fact and with giving away to those who don't "pay the way" is only going to make matters worse. Thanks for the perfectly clear and understandable comment.

Mtnrambo said...

I should have said " the cost of greed and laziness, hurts us all "...

I see it in my 2 grown sons...

My oldest, who is in his senior year of a 4 year college, hasn't worked or held a job in his life... part of that problem is his mother " hands " him anything he wants or needs...

When he was a senior in high school, I got on him to apply for scholarships, grants and financial aid for his college... he responded that he thought college was free...

I don't see him ever being a " go getter " like his dad, but more of one of those who will be very fortunate and " float " through life... ( an Obama supporter )...

On the other hand, my younger son, is a work-a-holic... he held 2 part-time jobs and had his own firewood business while in high school...

He has never asked for a thing and has done very well for himself for a person his age...

He is in his second year of college while operating his firewood/lawn care business and is plowing snow for hire this season...

People like this boy are the backbone of this country, not afraid to work and work hard at it...

I'm not saying I love or respect him more than my oldest, just that I certainly do agree with his work ethic and determination... I will never worry about this boy as I will my oldest...

Nothing in this world is free, be careful of those offering gifts, it usually comes with a price...

Jeff Dreibus said...

Ticker,

I agree that our "leaders" are indeed getting carried away with the "Chicken Little" act. However, you must admit that (to quote Algore, bless his little Earth-muffin heart) everything which should be "up" is "down" and vice-versa. To oversimplify, what we are witnessing is an economic "perfect storm" created by regulating absolutely everything except those few things which the government SHOULD be regulating (beginning with "free trade" -- don't get me started on that).

The reasons for our current economic woes are varied and multi-layered, and they point toward a need for dramatic policy change (in some cases out-and-out policy reversal) to choke off the twin demons of greed on the corporate side and opportunism disguised as idealism on the legislative side.

Until that happens, we had better get used to such "cycles" growing deeper and leaving much more permanent damage in their wakes each time they occur . . .

Jeff Dreibus

Ticker said...

I have no use for corporate greed as it is often referred to which is more often just corporations way of attempting to get around the strangling regulations placed on them by a money hungry legislature that needs a constant infusion of money to continue to stay in power and the way to get that is by regulating and taxing business beyond reasonable bounds. Until the game of who can out do who stops then we will be faced with each trying to gain the upper hand. I will take the side of business who in the long run creates wealth and vote against the governing bodies who attempt to regulate, legislate and tax business into subservient serfs subject to the almighty power of government control. It's called a war when countries do it but then they just go ahead and shot each other or blow each other up. It's still war and at some point a truce has to be called and lines drawn to stop the encroachment of one side onto the others turf.

Mtnrambo said...

Ticker wrote :

" I have no use for corporate greed as it is often referred to which is more often just corporations way of attempting to get around the strangling regulations placed on them by a money hungry legislature that needs a constant infusion of money to continue to stay in power and the way to get that is by regulating and taxing business beyond reasonable bounds. "

I just quit working for a company I worked at for 15 years, al for the reasons you describe...

They made $371 Billion in '06 and ONLY $317 Billion on '07... said they LOST money... told us to " tighten up ! "...

I went back to work for my old tried and true compnay, had 15 years with them prior to going with the thieving bastards I just quit !!!