It's Official

By Andrew Paparozzi
In December 2, 2008

We needn’t wait until the release of dismal fourth-quarter GDP results sometime towards the end of next
month in order to officially tag the economy has being in “recession.” The results for this quarter will most surely give us the second down quarter in a row—the often-quoted criteria for a recession. However, the National Bureau of Economic Research (NBER)—the group that officially dates business cycles in the
U.S. economy—has just placed the most recent peak in economic activity at December 2007. In other words: We’re in recession. No big surprise there. But, why the call that we’ve been in recession for almost a year?

According to the NBER, a recession is classified as “a significant decline in economic activity spread across the economy, lasting more than a few months.” It begins when the economy reaches a peak of activity and ends when the economy reaches its trough (low point). To put it simply, the NBER looks at variables in addition to GDP data to reach a conclusion. It looks at Gross Domestic Income—the other side of the ledger to GDP in the National Income and Product Accounts—and other variables such as industrial production, wholesale-retail trade sales, and employment. There is no fixed rule; it’s a judgment call by the NBER Business Cycle Dating Committee. But given current conditions, it’s unlikely they’ll be getting too much of an argument.

Based on the NBER call, the current recession will be one year old at the end of 2008, and has already outlasted the 2 previous recessions. Unfortunately, it doesn’t appear that a trough will be reached anytime soon after the New Year. Although the current quarter is likely to be the worst in terms of activity contraction, the recession will drag on well into 2009. Has the official recession designation changed anything? Other than providing a few headlines, it shouldn’t. The underlying message from the NAPL State of the Industry Report, Seventh Edition and other publications in the State of the Industry Series and the Choosing not to Participate in the Recession white paper NAPL published in September remains just as relevant as before. “Simply surviving recession is not enough anymore: We now either come out stronger than we went in by getting more productive, more competitive, and more valuable toour clients or we get left behind.” Although directed to the printing industry, in today’s global economy this message is easily transferred to most other
industries.

Andrew Paparozzi        Joseph Vincenzino        Kong Wang

 

Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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