Recovery vs. Expansion

This bit from Treasury Secretary Snow on The Club For Growth Blog got me thinking, which is always dangerous:

And while job growth can never be fast enough for those looking for work, the steady pace of job creation has been an unmistakable sign of an economy that has recovered from very tough times, and is now expanding.

I keep reading things in various sources, including business publications that really ought to know better, talk about the economy in terms of a ‘recovery’. Now, I’ll grant it’s been a few years and maybe I’m misremembering, but I believe recovery is that part of the business cycle between the bottom of a recession and the time when the economy reaches its previous peak, usually in terms of real GDP. Given that, the recovery ended sometime in 2001 or 2002 and the economy has actually been in an economic expansion for several years.

Year Real GDP
(billions of 2000 dollars)
2000 $9,817
2001 $9,866
2002 $10,080
2003 $10,390

The continued use of the term ‘recovery’ to refer to the current economic situation reflects either a basic ignorance that should disqualify the journalists from making comment on economic subjects or a basic dishonesty that should disqualify them as journalists period.

And in fact, I was hoodwinked into thinking we had a recession (two consecutive quarters of declining GDP) in the first place. In fact, there haven’t been two consecutive quarters of declining GDP since 2000.

Year
& GDP GDP
quarter Nominal Real
2000q1 9,629.4 9,695.6
2000q2 9,822.8 9,847.9
2000q3 9,862.1 9,836.6
2000q4 9,953.6 9,887.7
2001q1 10,021.5 9,875.6
2001q2 10,128.9 9,905.9
2001q3 10,135.1 9,871.1
2001q4 10,226.3 9,910.0
2002q1 10,338.2 9,993.5
2002q2 10,445.7 10,052.6
2002q3 10,546.5 10,117.3
2002q4 10,617.5 10,135.9
2003q1 10,744.6 10,184.4
2003q2 10,884.0 10,287.4
2003q3 11,116.7 10,472.8
2003q4 11,270.9 10,580.7
2004q1 11,472.6 10,697.5
2004q2 11,657.5 10,784.7
2004q3 11,814.9 10,891.0
2004q4 11,967.0 10,975.7

Source: Bureau of Economic Analysis

Today the Club for Growth lets a Wall Street Journal article slide in referring to the ‘recession and slowdown earlier this decade’. On the plus side, the Journal does get it right and refer to the current status of the economy as an ‘expansion’.

Sidenote: the Club is apparently tired of my trolling as they no longer allow comments, else I might have pointed out that there was never a recession. They still allow trackbacks though. Amateurs. 🙂

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