Who’s In A Recession And Whose Not?

Back around 1983 I worked for a man I will call Tom. Tom was part of the yuppie generation, but still a person who cared for others, unlike most of the yuppies from that era. Tom had just been promoted and would soon be moving to our corporate office in another city. Having worked there for a while, Tom knew I was familiar with the politics and atmosphere in the corporate office. He asked me if I thought he would survive in that environment. My answer was yes, but I added some observations. What I told Tom was that after being in the corporate office for less than a year he would forget about what was going on in the real world outside those four walls. His immediate, and almost belligerent reaction, was that would never happen to him; he had experienced what that had done to our company’s business and he would never let that happen to him. Unfortunately for Tom, it did happen, and just like all the others before him, Tom lost sight of what really mattered; the real world & our customers. Less than ten years later, a 25-year old thriving company that once boosted 49 offices world wide with over 1800 employees was out of business. This was not Tom’s fault; it was the attitude of the corporate level people who had inspired that environment in the first place.

If you look around today, that “four-wall isolation” mentality is thriving very well. Take your pick; corporations, politicians and elected officials, pro-business proponents, and the news media. Not a single one of them really know what’s happening in the real world. They are stuck in their world and that is the only place they ever go. They look at polls, surveys, reports, and samplings, but they never get out there and see that other world. When they leave their work environment, they walk into a world with those who are just like them. Therefore, to them, a different world either just doesn’t exist or it’s a far away place that they need not be concerned with.

Let me start with the business channels. You may have read before that I see them as just a great public relations outlet for most businesses. They just echo what big business is telling them. Then when one of those businesses suddenly go belly up or is exposed for some enormous impropriety, the business channels are ‘in shock’; “why it was just yesterday we were reporting how well they, their stock or earnings  were doing“. In so far as their guest, think about whom they are asking or talking to when the subject of recession comes up. Most are big business leaders, investment advisers, investment managers, etc. who would have a lot to loose if they admitted that a recession exists. These guest point to all sorts of data. And when the data doesn’t support their objective, they say things like “if you take out this and take out that, then add this and add that, then take into account that the last interest rate drop and/or stimulus package has already been factored in, the data is great. So we’re not in a recession, and I don’t know where all these people are getting that from“. And while all this is going on, the shows hosts are just nodding their heads in agreement, and often adding their agreeable comments. Let me offer a suggestion; bring on some guest who are not making six and seven figures a year and ask them the same question; “are we are in a recession”?

Now lets take a look at the regular news outlets; the three networks, CNN, Fox News, most of the major newspapers, and others. They all report on certain “hard times” stories. But once again, their “experts” on the matter are most of the same as the business channels.

None of the media challenges these experts and put them to task. If you are familiar with any of my stuff, you know that my definition of “politically correct” is very broad. The one that fits here is “if I don’t like the facts, I’ll just change them”.

The one thing we must remember; neither an administration nor their supporters will ever admit to a recession during their watch until there is no way out. It would be political suicide. And when I say “supporters”, I also mean those that are benefactors of the current economic situation and those who can be harmed by admitting that a recession exists.

Wiki Answers offers a brief condensed definition of a recession: “An economic recession is a slowdown in economic activity characterized by less consumer spending and often also by higher unemployment. Generally accepted indicators of a recession are usually a decline of Gross Domestic Product for two consecutive quarters and a sudden increase by 2 percent or more in the unemployment rate. However, since it takes a significant time to compile and verify the economic data, a recession may be well underway or even over when government agencies officially declare it.” But the broader definition leaves an awful lot to interpretation. It also says that many of the defined indicators doesn’t always hold true. Further, it says that there are things that may or may not be involved. In other words, defining a recession is left open for a lot of interpretation. And maybe that’s what the definers wanted. Or maybe they just don’t know how to define a real recession that doesn’t harm them. Wikipedia says the “Effects of Recession” are unemployment, foreclosures, bankruptcies, stock market downturn, reduced sales, banks lending less money, and inflation. As of today (May 2008), the only thing we do not have is a downturn in the stock market. And the people who are saying there is no recession are closely tied to the stock market. For them, there is no recession.

One of the latest indicators that has been used to determine if we are in a recession or not is how well things are globally. On one CNBC show just after the April unemployment figures were released, one guest was challenging the figures. He was arguing that there has been a huge increase in employment. He cited one company that had hire 16,000 new employees. Even with the shows hosts, this seemed to be just too much, and they questioned where he got his figures. When the guest was pinned down, it turned out the 16,000 was hired in Dubai by a company with American ties. And, it seemed, all those other employment gains were also in foreign countries.

A recession is defined & redefined by many, and often argued. Lately, those who have said there is no recession in spite of the fact that most defined indicators say we are take one of those arguments mentioned above; “if you take out the cost of oil (gas) and the increase in food prices, then no recession exist”. Yea, like people don’t need oil, gas, or food to survive!

‘Recession is when your neighbor loses his job; depression is when you lose yours’. Maybe these folks I’m talking about need to loose their job.

The bottom line is that those who are wealthy (not bothered by the cost of living) are not in a recession. But the vast majorities, those who are not wealthy, are in a recession. One web site that offers to help you find jobs even advertises “recession proofing” yourself by finding a job making over $100,000 per year. And guess which group in the media is telling us whether or not we’re in a recession.