Recession Essay, Research Paper

Despite all the recession talk recently, the economy apparently isn’t doing so badly. The Commerce department today (4.27) announced that GDP grew at a 2.0% annual rate in the first quarter. This was up from 1% in the final quarter of 2000.

The 2% rate is still slower than this time last year, but it seems as though a recession has been avoided for another quarter. (A recession is often defined by 2 or more quarters of negative growth, click here for more on the definition of a recession). This means that the current expansion has lasted for an even ten years – the trough of the recession in the early 1990’s came in March of 1991.

Caution: Revisions

The number that was released is the “advance GDP report” and is subject to revision. In the last two quarter of 2000, the final release was slightly lower than the advance number – so it’s possible – but very unlikely – that we will be dipping below the zero mark.

On average preliminary real GDP is revised by 0.6 points to reach the final measure – in 90 percent of the cases the revision (advance to final) was between – 0.9 to 1.3. (See table)

Revisions to Real GDP Average 2/3 of revisions 90% of revisions

Advance to preliminary 0.5 -0.5 to 0.7 -0.9 to 1.2

Advance to final 0.6 -0.6 to 0.9 -0.9 to 1.3

Preliminary to final 0.3 -0.4 to 0.4 -0.5 to 0.6

Advance to latest 1.4 -1.1 to 2.0 -1.6 to 3.4

Preliminary to latest 1.4 -1.2 to 2.0 -1.7 to 3.1

Final to latest 1.4 -1.1 to 2.3 -1.8 to 3.0

(Data: 1978- current)

Despite all the warning signs, negative talk, falling consumer confidence and a weak market, it seems that our economy is not as fragile as feared. The 2% increase should be taken as good news.

We should be celebrating…

A decade of uninterrupted growth! This is the longest expansion on record – a full 10 years with no recession. Perhaps I’m just an optimist economists, but I plan on boycotting the negative news for the weekend and having a bottle of Champagne to celebrate.

Cheers!