Sick of the 'R' word

Is the economy in a recession or not? Who cares? The economy is clearly in rough shape and debating about word choice misses the point.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Paul R. La Monica, CNNMoney.com editor at large

paul_lamonica_morning_buzz2.jpg
Most of the Uncle Sam stimulus checks have been sent out. How did you use your rebate?
  • Spent it on essentials
  • Paid credit card debt
  • Added to my savings
  • Splurged on something fun

NEW YORK (CNNMoney.com) -- Are we in a recession or not? And if we are, when did it begin?

I don't know about you, but I'm tired of the recession debate. Does it really matter if this current economic period ever (or never) gets labeled a recession?

Clearly, the economy is in the middle of a very rough patch. Housing prices have slumped. The credit markets are a mess. Energy and food prices have skyrocketed over the past year. The unemployment rate is rising and the economy has been shedding jobs this year.

Even if it weren't technically a recession, that would be of little consolation to those struggling to pay bills or find work. Bottom line: the economy is in poor shape for many Americans and that's what matters.

What's more, the group that makes the official call on recessions, the National Bureau of Economic Research, tends to take its time on determining recessions. So if it the NBER ever does call this a recession, it might already be almost over.

"To think this isn't a recession would be foolish. But by the time the pronouncement comes, it will be too late to strategically do anything about it," said Scott Colyer, CEO of Advisors Asset Management.

The NBER didn't officially declare the beginning of the 2001 recession, which lasted from March until November of that year, until November. And the NBER didn't pronounce that the recession had actually ended until July 2003.

That's not a criticism of the NBER, mind you. It should carefully scrutinize all available data instead of rushing into judgment. But that underscores how silly it is for people to try and guess if or when the NBER will make a recession call.

At this point in time, it's far more important to try and determine where the economy is headed next instead of staying stuck on how to characterize the economy's current state or obsessing about how we got here.

"There are many questions - profound ones at that - which will take time to answer and then, so late, be of little avail," wrote Val Jensen, founder of investment firm Jensen Capital Management in a recent note to its clients. "Finance is a forward-looking business, never patient enough to tidy up yesterday's messes."

Along those lines, loyal readers of this column will know that I've been trying to look ahead instead of backward. And I've been more optimistic about the chances of a recovery than many economists and colleagues in the press (including several on our staff.)

And I still think that there are some positive developments lately that lead me to believe that what the economy is experiencing is a normal cyclical slowdown after several years or economic growth and not a sign of impending doom.

OIl prices, after hitting a record high in July, have pulled back and the price of gas has come down along with it. The dollar has strengthened. Demand for exports has helped hold the economy up and many U.S. corporations outside of the banking sector still have incredibly strong balance sheets.

Finally, the most recent round of data about home prices and home sales suggest that the real estate market, while far from healthy, may be finally showing some signs of stabilizing.

With all this in mind, Colyer compared the current state of the markets and economy to the shape of an old-style bathtub. When you first stick your foot in, you have a ways to go before you hit the bottom and you're likely to stick around the bottom for awhile once you're in. Finally, you need to be really careful when you try and step out.

Using that analogy, the best thing for people to do now is try and figure out how to get out of the bathtub, not labor on about why and how we found ourselves in the bathtub.

And we definitely shouldn't waste time trying to figure out if we should call it a bathtub in the first place. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.