by Chris Chmura, Originally published in the Richmond Times-Dispatch
Are there signs that the nation has fallen or is slipping into recession?
I recently heard an analyst on a television news program say he thought the U.S. economy was in danger of falling into recession.
The analyst then said he believed the nation was already in recession. In an apparent attempt to give more credibility to his assessment, he remarked that the Congressional Budget Office typically takes about seven months after a recession has started before declaring that the nation is in recession.
I already wondered why the network was giving this analyst airtime, and the CBO comment gave me further reason to question his expertise. It is the National Bureau of Economic Research, by the way, and not the CBO that is the official arbiter of recession dates.
The National Bureau of Economic Research looks at such indicators as real gross domestic product, real income, employment, industrial production and real retail sales.
Second-quarter GDP has not yet been released, and the latest data on real personal income show it growing through March.
Employment growth remains modest, but payrolls expanded by 115,000 in April.
Industrial production and real retail sales also continued to grow in April. No signs here of a recession.
Sometimes, economists point to headwinds that are intensifying that could lead to recession. Most of the headwinds are winding down instead of intensifying.
Gasoline prices have dropped in the past few weeks, giving consumers more money to spend on other items such as summer vacation. Home prices are beginning to rise in more metropolitan areas across the nation.
The unemployment rate is inching downward, albeit slowly with many discouraged workers still waiting at the sideline.
Rather than showing the nation slipping into recession, economic reports point toward continued, moderate recovery.
Of course, if you want to be pessimistic, you can always worry about issues in Europe affecting our banking system and economy. At this point, such worries are premature.
However, a more pressing concern is the impact of automatic federal spending cuts and expiration of Bush tax cuts that might be triggered come Jan. 1 as part of the Budget Control Act of 2011.
Based on a May 2012 Congressional Budget Office report, the federal spending cuts and the higher taxes associated with the Budget Control Act would cause real GDP to contract during the first half of 2013.
"Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession," the budget office report said.
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