Recession Talk Is In The Air

2025-04-04 10:14:58

(MENAFN- Asia Times) The Wall Street Journal's Spencer Jakab pointed out something interesting the other day: There's been a spike in Google searches on the word“recession.”

It's easy to understand why. Worries that tariffs will spur inflation have sent consumer confidence tumbling. The University of Michigan's Index of Consumer Expectations fell 18% in March from April and 30% from last November.

When consumers' confidence falls, they typically cut back on purchases. That prospect has economists lowering their economic growth forecasts and seeing higher odds of a recession. Analysts cite recession fears as a major cause of the recent stock-market slump.

In all this recession talk there lurks a question most of the commentators take for granted. What is a recession, exactly, and how will we know when we're in one?

Economists favor the definition used by the non-partisan National Bureau of Economic Research. A recession, NBER said, is“a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

Many commentators who aren't economists rely on a simpler (though somewhat misleading) rule of thumb: A recession is two consecutive quarters of declining GDP.

For the man on the street, there's Ronald Reagan's famous definition:“Recession is when your neighbor loses his job. Depression is when you lose yours.”

Each of these definitions has problems.

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