Weak Job Data Cause Media to Forget the Definition of a Recession … Again

January 4th, 2008 4:49 PM

Shoe leatherIt wasn't good news by any means, but it also wasn't the end of the world.

The Bureau of Labor Statistics of the U.S. Department of Labor reported January 4 the unemployment rate rose to 5 percent in December, but if you're paying attention to the media coverage, you would think it's time to whip up some shoe leather stew and play "Brother Can You Spare a Dime."

A January 4 Associated Press story by Jeannine Aversa pointed to the job data as one of the "problems in the economy" that has "elevated fears about a recession." But even with all these "problems" - housing woes, the credit crunch, high oil prices, weak job numbers - the criteria of the economy being in a recession still haven't been close to being met.

A recession is a period of general economic decline; specifically, a decline in GDP [gross domestic product] for two or more consecutive quarters.

For the last two quarters, GDP (as reported by the U.S. Commerce Department) has grown at a rate of 3.8 percent in the second quarter of 2007 and 4.9 percent in the third quarter - not a sign of a recessionary trend.

Although fourth-quarter GDP numbers for 2007 won't be released until March, they're not necessarily looking to be negative. Economist and "Kudlow & Company" host Larry Kudlow told viewers of CNBC's January 4 "The Call" that GDP will come in at least at 2 percent.

"Our economy can grow at three-and-a-half percent," Kudlow said. "That is its potential. Right now, in the fourth quarter, it's going to grow one percentage point less."

Although the unemployment report wasn't good, it wasn't nearly as bad as it has been during times of a recession, Aversa pointed out:

"The 5 percent rate for December is relatively low by historical standards. In the recession of the early 1980s, for example, the jobless rate reached double-digit levels."

Unfounded fears about the U.S. economy being in recession, fueled by the media both domestically and abroad, have caused investors to lose faith in the U.S. dollar.

Paul Ashworth, U.S. economist for Capital Economics, an "economic research consultancy" in the United Kingdom, told the January 4 Guardian (U.K.) "if the [U.S.] economy isn't already in recession it must be pretty close by now."