How do we know whether we're really economically miserable? The official definition of a recession is two or more consecutive quarters of negative GDP growth. As long as GDP grows by even one dollar during the quarter, that interrupts any recession that might be taking place - officially speaking.
However, reality is more complex. That one dollar growth in production does nothing to improve the well-being of people if prices and/or population have risen during that quarter - and usually they both do increase. A 0.1% increase in your income is a decrease in practical terms if prices have risen by 1%, or if that income is shared by more people.
The graph above shows data downloaded from FRED, the research arm of the St. Louis Federal Reserve Bank. The blue curve is the annualized percent change in raw GDP - the official number, reported by the media. The orange curve is the much more important number, adjusted for price increases and population increases. According to the orange curve, the 2008-2009 recession was four quarters long, not three. 2011Q1 and 2012Q4 were contractions as well according to the orange curve.
As far as we know at this time, we are not yet in a recession. The second quarter will shed more light on this question.
However, reality is more complex. That one dollar growth in production does nothing to improve the well-being of people if prices and/or population have risen during that quarter - and usually they both do increase. A 0.1% increase in your income is a decrease in practical terms if prices have risen by 1%, or if that income is shared by more people.
The graph above shows data downloaded from FRED, the research arm of the St. Louis Federal Reserve Bank. The blue curve is the annualized percent change in raw GDP - the official number, reported by the media. The orange curve is the much more important number, adjusted for price increases and population increases. According to the orange curve, the 2008-2009 recession was four quarters long, not three. 2011Q1 and 2012Q4 were contractions as well according to the orange curve.
As far as we know at this time, we are not yet in a recession. The second quarter will shed more light on this question.
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