Tuesday, December 02, 2008

U.S. officially in recession

I'm sure you've all heard this by now: The United States is officially in a recession.
The National Bureau of Economic Research—a private, nonprofit research organization—said its group of academic economists who determine business cycles decided that the US recession began last December.

The news pushed US stocks lower and renewed calls for another economic stimulus program.

The current recession, which many economists expect to persist through the middle of next year, is already the third-longest since the Great Depression, behind only the 16-month slumps of the mid-1970s and early 1980s.

"I think that we've got a ways to go, that this is going to be probably a deep and long recession," Jeffrey Frankel, a Harvard University economist who sits on the NBER's committee, told CNBC. "It could be the worst post-War recession. We don't know yet." ...

Many Wall Street financial institutions already had declared that the US recession began in December 2007, when there was a sharp increase in the US unemployment rate.

The last two recessions have been so short—about eight months—that the NBER's official prenouncement came after the downturn had actually ended. ...

What's been confusing for economists this time around is that a contraction in gross domestic product—what laymen consider a key recession indicator—did not happen until the third quarter of this year.

Other key barometers, such as payrolls and the jobless rate, have clearly been in a recessionary trend for most, if not all, of the year, economists say. ...

A senior adviser to U.S. President-elect Barack Obama said news that the United States has been in a recession for a year underscored the need for an economic stimulus package.

Lawrence Summers, tapped by Obama to become director of the White House National Economic Council, said the slump may be worsening.
Based on the currently available numbers, it does not (yet) look like this recession is deeper than the early 1980s recession, but it will almost certainly be longer—possibly much longer. What should the government do in response to this extended recession? See here.

To my readers: I hope you will do your patriotic duty and buy your family lots of presents this holiday season—And buy a few gifts for yourself too. This doesn't mean you just go out and buy a bunch of junk. Instead, think of things you would likely buy at some point in the future, and simply move the purchases forward in time. Your nation's economy is depending on you.

Ignoring the housing bubble—What a great idea you guys had, Messrs. Greenspan and Bernanke!


  1. NBER can roll out all the fancy "statistics" they like, I think we were officially in a recession right about when people started wearing clothes made from their pets' shed fur.

  2. Arlington Meltdown - its coming my children...recall my prediciton last year:

    "As to when 14 to 20 months of inventory (implosion level), inner DC is about one year behind San Diego. In other words... around next Christmas.

    So YES the inventory levels will get that bad. The real estate market will not see enough of a 'spring bounce' in sales to overcome an unusually large 'spring bounce' in inventory.

    Got popcorn?

    December 21, 2007 4:04 PM"

    See, I planned it such that the 6 months of inventory Arlington has now is a ruse...next month it will instantly spike at 14-20 months - bet on it!!!!

    Got Bacon?


  3. "I hope you will do your patriotic duty and buy your family lots of presents this holiday season—And buy a few gifts for yourself too..."

    OK, you spend but I will certainly keep my money. It is ABC in economics.

  4. Got fear and denial?

    God, this is so great!

  5. "next month it will instantly spike at 14-20 months"

    According to WaPo, it is already there!!


    “Sales prices fell 8.1 percent during the third quarter. At the current pace, it would take 8.2 years to sell the finished and almost-completed new-construction condominiums on the market, according to the study”


  6. “Sales prices fell 8.1 percent during the third quarter. At the current pace, it would take 8.2 years to sell the finished and almost-completed new-construction condominiums on the market, according to the study”

    Thats 8.2 years AREA WIDE dummy - not arlington - the article says as much. Oh and dont tell me that most of these are in arlington - theyre not. Wanna know why, the next line in that article says:

    "The condo market, where the earliest signs of weakness in the overall housing market emerged in late 2005, will probably not stabilize in the District and its inner suburbs until the end of 2009 or even 2010, said William Rich, who follows the market for Delta Associates. It will take longer for the outer suburbs, such as Loudoun and Prince William counties, to recover, he said."

    So, not only are areas like Arlington least affected so far, they are the FIRST areas to recover! Oh how I love the irony of it all!!! I personally could care less about Arlington, but I love how the mere fact that some areas are doing better than others sends anonymous bloggers into fits of rage and anger! Its really quite comical!!!

  7. ahhhh.....denial spiced with more fear and anger...delicious!!

  8. The denial of an economic recession by our government, up until now, for all this time is complete bs. I agree with James regarding the fact that we should really aim to buy US based goods to support our economy. So go out and spend!

  9. "ahhhh.....denial spiced with more fear and anger...delicious!!"

    Agreed - Sizzle-Lien, please provide us with more predictions about impending doom that didnt happen! I love seeing how some people got it so wrong, oh so wrong!

  10. Denial-Lien, don't be so fearful and angry.

  11. Hes fearful and angry because he isnt getting the 40% off in Arlington he predicted. A year ago at this time 40% off looked to be a good bet, yet one year later and median prices are down -3.4% (average -2.7%).

    Id be fearful and angry if I was in his shoes too. Really I feel sorry for the guy...

    He should really look in Loudoun co with me. Out here, its -35% off and no end in sight!

  12. Here's a fish for you, Flipper.

  13. I don't understand why anyone would want to live in Arlington.

  14. Neither do I James - but apparently there is a small but sizeable minority that wants to live there that is clearly propping up prices.

    I say, let them have it - its no skin off my nose. I would hate for all those overpayers to be setting comps throughout the area - better to have all them concentrated in the tiny inside the beltway areas.

  15. "James said...
    I don't understand why anyone would want to live in Arlington."

    Its a lifestyle issue James. Like you, (I assume) I grew up a child of suburbia. I figured id end up in the burbs as an adult - its just what you do.

    Then I met my wife, and moved in with her in Adams Morgan - my how my life changed:

    - everything is now 5 minutes away, often by foot. Time was, I would drive 30-45 minutes to see a friend - never thought twice about it. Now, if im in the car more than 10 minutes I get surly and irritable. My time is so much freeer now!

    - the housing stock here is truly unique. In modern day suburbia, you live in a house built by 1 of 7 or 8 major builders...you have a brick front, vinyl siding, no mature trees - in a word its soulless (note, older burbs [pre 1940] do have character). By contrast, where I live, houses are brick (not brick facade - solid brick), and are all truly unique.

    - My restaurant and choices are unique. In suburbia, you eating choices are largely limited to chilis, ruby tuesdays, or some other chain restarurant where the prepackaged food was prepared in Lawrence kansas and thawed before serving to you. To be sure, you do have some good ethnic food (some of it great) but its often in some soulless strip mall. Here, you have unique, one of a kind restaurants, few if any chain stores in sight. I know what will be served because I shop at the same farmers market the chefs do on saturday mornings. The food is truly unique and ever changing.

    Dont think I am bashing the burbs - There are major downsides to living here that you dont have to deal with.

    - its cramped and noisy. It took me months to be able to sleep through the fire engines that rumble down the street 2-3 times a week - and personal space is a non starter. That said, because we dont have much space, I have gotten to know every one of my neighbors - every single one - many of which are now good friends.

    - there is crime here, no doubt. We have bums, winos, occasional pickpockets, etc. I will say however, its becoming less and less prevalent every year.

    - the schools suck. Yes they are getting better, but they still have a long way to go. As it stands I can afford to pay for private school, but it would be nice if the public schools were a few more years into their revampment. In the suburbs, they really are top notch.

    - the houses and yards are tiny. In a way this goes back to the space issue. However, I can say, I havent mowed a lawn in 10 years, and its something I certainly dont miss.

    In sum, it really comes down to a lifestyle issue. 90-95% of this countries housing stock and way of life is fungible. In most of it you can eat at Carabbas, live in a pulte home, and shop at target, same here as it is in Ralleigh, NC, Springfield, Ill, Houston, TX - its all the same "McCulture".

    5-10% of this country is truly unique. Adams Morgan - Austin, TX, Old Town Leesburg, Manhattan beach, CA, etc.. For those that want to something more unique, there are few places we can live, and we are willing to pay dearly for this privilege...to each their own...

  16. Anon 6:50,

    I agree with you completely. I would add that McCulture is doomed for reasons that should be obvious to any breathing person.

    As recently as 1965, the medical community didn't understand why heart disease had become the #1 killer of men and women following WWII. Really, before the war, people tended to be thin, lived in walkable communities, and the vast majority of people did not own cars.

    The correlation between McCulture (suburban sprawl, total dependance upon personal automobiles, and conspicuous consumption) and the ills of modern living is only now being grasped by McCitizens.

    McCulture gutted the city as the middle-class fled to get a slice of the McPie, but the trend has obviously reversed and is accelerating. Certain 'burbs are bound to be slums in five years.

  17. I agree, but it will take longer than 5 years to become the slums. In my hood, the large houses once owned by industrialists and merchants, were partitioned into 3-6 multifamily units, but that took years to get there. These areas were on the decline from the 1890s, but didnt get multifamilied til the 1940s. Its only since say, 1995 that they have been slowly reconverted back to SFH.

    The same thing will happen with the huge exurban McMansions, but it will take time, NIMBY groups will mobilize to fight it, but eventually as their numbers dwindle (i.e. they move away), they wont have the critical mass to stop market forces. Further, the counties will support it as it brings in more tax revenue (per square foot) - so it will happen, but it will take time - 10 years at least and likely 20 to really get going.

    Good thing for James is he has plenty of time to live in a place and sell it to some other rube before that guy realizes how bad it may get. Plus now that he is cognizant of this, he will likely be more careful of trends when choosing which hood to buy in (some will be just fine - the burbs will never die off completely).

    I will say, much of PWC which was not well off to begin with is doomed!

  18. I differ on the timeline for the 'burbs, but agree on the city timeline. My (very old) home in the city was partitioned over many years, to the point where the individual rooms were rented out. I'm the first owner to live in the house since it was renovated and converted back into a SFH.

    But the suburbs... we saw the end of suburban sprawl this summer, although most people don't know it. Construction has ceased. Real estate values in outlying areas plummeted, and homebuilders are folding.

    Meanwhile, the municipal budgets for suburban communities (Loudoun, PWC, Fairfax, Montgomery, PG County) are all in the red. Any quick review of recent local headlines and press releases will reveal that all of the above are hundreds of millions in the hole because their revenues were tied to rising real estate tax assessments.

    There is no way out. A dwindling tax base (real estate taxes) leads to cuts in services. We are seeing those cuts now in Loudoun and Montgomery counties.

    Low fuel prices are the life support system for the 'burbs. Expensive oil is going to kill the outer 'burbs. It isn't a question of "if", rather it is a question of "when". The speed of change in the 21st Century has already outstripped the speed of change in the 19th and early 20th century.

    Extrapolate this scenario to other metro areas with sprawling suburbs but with a weaker economy than that of Washington. The change will come faster in those areas.

  19. I still think you are being too quick but you bring up a great point:

    "Extrapolate this scenario to other metro areas with sprawling suburbs but with a weaker economy than that of Washington. The change will come faster in those areas."

    The inland empire of CA comes to mind. The overbuilding and implosion there (not to mention the extreme distance) puts us to shame (save perhaps PWC). LA is hemmoraging away jobs while we are still adding jobs in DC.

    So maybe thats our bellweather - the canary in the coal mine. If we hear reports of partitioning into tenement developments there watch out PWC!

  20. Incidentally, I think gas prices certainly contribute to the issue (i.e. speed it up), but the movement back in will continue either way.

    Cities like NYC started their revival probably 15-20 years ago. Here it was probably more like 10-15, but either way gas was cheap when the movement back in started. Thats why im not worried that fuel looks to be cheap for a while, the trend started well before fuel was really an issue to many. For many, it was/is a matter of personal preference that will continue.

  21. Agreed that the in-bound movement will continue.

    As for the pace of suburban McMansion partitioning; a quick Google search for "McMansion partitioning" reveals that we aren't the only anonymous strangers talking about it on the Internet.

    Glad to know that you and your wife are in the city. My wife and I are often surprised at the rapid pace of change in DC. I've been in Washington since 1992. She's been here since 2005, and even she is surprised at the rate of change.