Recession

As expected, the US recession started in December 2007.

The NBER's Business Cycle Dating Committee has announced that the US economic cycle has entered into what they define as a recession. I had posted about this before ("You know this but do you feel it?"). The data from end-2007 all pointed to a recession.

Please now that the "traditional definition" is no such thing. 2 consecutive quarters of decline are not the definition of a recession, at least not in the US economy. The NBER defines it as:

“a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators”

It's time to call in the big guns

Today's job report is dismal indeed;

Here is a chart showing the monthly numbers and consumer confidence:


And Krugman points out that:

Monetary policy obviously isn’t enough. It’s time to raise Keynes: we need big fiscal stimulus, now now now.

I agree with this. Financial stability is a necessary, but not sufficient condition for economic growth. The government needs to step in and provide real stimulus to the working class and the unemployed.

We are in for a lot of pain. Quoting Krugman again:

So the “worst recession in 25 years” thing is now baked in. The only question is whether we hit “worst slump since the Great Depression” territory.