Wednesday, May 28, 2008

Singing the Recession Blues

Justin is the TPS source for all things recession, though this article got me to thinking:

- Why do people care so much if we're in a recession? People know if their own situation is more tenuous now than a year ago; does it make them feel better if others are doing badly too? Further, if it's relative measures that are so important, couldn't we just flash some pictures of sub-Saharan Africa and then everyone would feel better? The scary thing might be if people know they're in a recession, they might want the government to do something about it.

- The article is purposely inflammatory, as most articles of this ilk are, but this one seems to bother me more than most.

"...led more people to report that their personal finances have worsened than at any time since 1982, according to a recent consumer survey..."

What does that even mean? Could that be any more vague-yet-foreboding? And mind you, again, that's a relative statement, so it says nothing about the absolute state of welfare.

"They predict the unemployment rate will jump by one percentage point to 6.0% by year end."

How people could estimate this, how they could arrive at 6.0%, why we're asking them, and why this figure even matters is all beyond me. Maybe we should ask them what the unemployment rate will be in 2036? Asking a lot of people (and betting markets for that matter) works well when there's dispersed information to be aggregated; information concerning the unemployment rate in the future is not out there. (I guess the best you could do would be to survey all employers, but that's still a best guess, and certainly not what the survey did.)
"A survey from the Conference Board released Tuesday found that only 13.4% of respondents said they expect their incomes to rise in the next six months, the lowest level since the study began 41 years ago."

Note that the initial reaction is "wow, 87% of people think their income is going to fall." I'd be willing to bet "stay about the same" is a large chunk of that other 87%. Again, the sky is falling...

"Their inflation expectation has hit an all-time high."

Now this is actually interesting, as it has real macroeconomic implications. Too bad that's all they said about it. If we're going to have surveys, I would love to see a set of questions getting at this issue. To what do they attribute their high inflation expectations? Worldwide factors? The Fed? That I would like to see.


danarch said...

I think at all times there needs to be some sort of FUD (fear, uncertainty and doubt) about something. People cry about the subprime markets, but not many people were actually affected by this. If you look at the hard numbers, or even the percentages, things are not bad at all. People just need something to bitch and moan about and this seems as good a topic as any. That, and I think people want to have some explanation (other than supply and demand) behind why gas prices are high - by saying we're in a recession or whatever, people can have a false hope that when the recession is "over" gas will be back to $1.50. I'm starting to just give up on reading the news.

Justin M Ross said...

The blues sound better as a band than a solo. People care about whether or not the country is in a recession because 1) Misery Loves Company; 2) It allows us to assign the fault elsewhere. If it were just my income that wasn't increasing or if I just lost my job, then maybe it would be my fault. Since it is happening to everyone, there are external forces beyond my control that have made this happen.