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Analysis: Recession Not Likely

Analysis: Recession Not Likely

By | 05.03.16
Analysis: Recession Not Likely

Recession Not LikelyI’ve heard a lot of gloom and doom about GDP for the first quarter. This has been a slow and sometimes painful recovery to say the least, but let’s not forget the recovery from the last recession was almost as bad. So much so, the announcement of the recession’s end was not made until July 2003, more than a year and half after it had ended. The reason it took so long was because no one was sure if it had ended. This is one of the longest time periods between the end of a recession and the announcement the recovery was under way. The recession that ended in March 1991 took about a month longer to announce.

The results of the latest quarter of GDP were tepid to say they least; it was down from last quarter, in fact, growth in GDP has been slowing since the 2nd quarter of last year. That sounds really bad, but that does not mean we are in a recession or entering a recession. It only means the economy has grown slower and I emphasize the word “grown”.  A recession means the economy is shrinking. By way of a metaphor, if one summer your toddler grows two inches and the next summer he or she grows one inch, do you automatically assume their growth is about to end? Will they be 2’8” the rest of their lives? Slower growth is still growth.

GDP in the 1st quarter of 2016 grew at half a percent; politically this will be fodder for the Republicans because the White House is controlled by a Democrat. If the White House was controlled by a Republican, their pronouncements would be similar to what I’m saying here, only more positive.

Looking back over the last few years, the first quarter has been slower than the other three quarters six out of eight times. And it’s been negative three out of those six. The first quarter is the only quarter that has been negative since 2010.

We could be headed for a recession, but that’s not likely at this time. That’s not to say there could not be some surprise that would take us into a recession, but there is nothing looming on the horizon that would indicate a recession is likely.

 

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