The Economists Who Cried “Recession!”

At a recent meeting of retail industry executives, the words on everyone’s lips were “the coming recession.” I’m not an economist, but if I were, I think the hardest part of the job these days would be explaining away the headlines that seem to betray the mantra that the economy is about to go into reverse. For example:

CNN: “5 Signs The World Is Headed For a Recession.”

Fortune Magazine reported that a leading economist predicts “a ‘long and ugly’ recession.”

Jamie Dimon, CEO of Wall Street mega-bank JPMorgan, warned that the U.S. may be headed toward “something worse” than a recession.

The Hill, a political news site, did a survey that found, “86 percent of CEOs expect recession in next 12 months.”

Bloomberg News, the premier outlet for reputable economic reporting, declared, “Forecast for US Recession Within Year Hits 100%.”

On the other hand, here are a few recent headlines that seem to describe a parallel universe:

“Retail Earnings Are Surprisingly Strong.” Barrons Magazine

“Amazon Says It Had Its Biggest Ever Thanksgiving Shopping Weekend.” AP News

“Consumer Spending Jumped in October as Inflation Eased.” Wall Street Journal

“U.S. Jobless Claims Fell Last Week, Showing Solid Labor Market.” Wall Street Journal

The Federal Reserve reports that the unemployment rate currently hovers just above the lowest rate in 70 years.

“New Home Sales Increase in October.” National Association of Homebuilders

Despite all this rosy news, let’s say the economists are right — a recession will happen this coming year. For starters, I hit the books for a definition of a recession. According to the National Bureau of Economic Research, a highly-regarded, century-old nonprofit research organization, it is “a period of temporary economic decline” lasting at least six months (two quarters).

Next, I flipped the calendar back a half-century. Since 1972, the U.S. economy has experienced seven recessions that, in total, lasted 20 quarters out of a possible 200 — 10% of the time. So, during the past 50 years, the economy has been growing 90% of the time. Not a bad record. And of the seven recessions recorded during that time, four lasted eight months or less.

The most cited and worst recession during the past 25 years began with the 2007-2009 financial crisis and lasted 18 months, the longest downturn since the 1930s. Any parallels? What were the headlines reporting back in 2008?

Bear Stearns, a major investment bank, was about to go bankrupt when it was bought for pennies on the dollar by J.P. Morgan Chase.

Lehman Brothers, another venerable Wall Street firm, collapsed and disappeared.

The Wall Street Journal: “Worst Crisis Since ‘30s, With No End Yet in Sight.”

The New York Times: “U.S. Loses 533,000 Jobs in Biggest Drop Since 1974.”

Bloomberg: “Housing Prices in 20 U.S. Cities Fall a Record 18.5%.”

I’m still not an economist, and the real ones might be right in the end. But I can’t help wondering if the overarching imperative these days is to create as much drama (and eyeballs) as possible. The way to do that is to trumpet the negative, like Aesop’s lonely shepherd boy who amused himself by crying “Wolf!” just to tease the villagers.