"The data are pretty clear that we are not in a recession," says Edward Lazear, chairman of George Bush's Council of Economic Advisers. What's more, he told the Wall Street Journal confidently, while the second quarter "is likely to see flat economic activity," the economic stimulus package, along with the Federal Reserve's interest-rate cuts, "should make the second half of the year a 'solid growth period.'"
Martin Feldstein, who was a top economic adviser to Ronald Reagan, and who currently serves as president of the National Bureau of Economic Research, the organization "officially" entrusted with deciding when recessions begin and end, demurs. While stopping short of declaring a recession, he provides a very glum view of the current U.S. economy in an opinion piece in the Financial Times.
The current 0.6 estimate for positiv economic growth in the first quarter of 2008, he argues, does not accurately represent what is going on.
The recent government report that US gross domestic product increased 0.6 per cent in the first quarter was very misleading. It implied that economic activity was rising in January, February and March. But the increase actually refers to the rise from the average level in the fourth quarter of 2007 to the average level in the first quarter. Monthly data since January indicate that economic activity and GDP have been declining since the start of this year...
The consequences of inappropriate optimism could be dire:
The misstatement that the economy expanded in the first quarter creates an inappropriately sanguine view of the months ahead and therefore reduces the prospect of strong action to prevent the deep decline that may otherwise occur.
Meanwhile, Brad DeLong, a deputy assistant secretary of the U.S. Treasury during the Clinton administration, splits the difference and says in the current Macleans that "it looks like it's the weakest possible not-recession."
So what do today's data tell us? Retail sales exceeded expectations in April, led by reasonable growth at Wal-Mart and CostCo. That's a heartening sign for optimists, even though the numbers may be skewed by an early Easter. But there's also another way to look at it. If the economy was slowing down, wouldn't you expect bargain-basement outlets like Wal-mart and CostCo to do relatively well?
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