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AP: The Longest Recession In 25 Years

From those relentless and unerring economic Solons at the Associated Press:

Economy declined 0.5 percent in third quarter


WASHINGTON – As the longest recession in a quarter century intensifies, analysts believe the small decline in economic activity in the third quarter has worsened significantly in the current fourth quarter.

The Commerce Department said Tuesday that the gross domestic product, the broadest measure of economic health, declined at an annual rate of 0.5 percent in the July-September quarter. Corporate profits fell 1.2 percent.

Some economists believe the economy’s decline in the October-December period could be as large as 6 percent. If so, that would be the worst quarterly drop since 1982.

"It will get a lot worse before it gets better," said Nariman Behravesh, chief economist at IHS Global Insight, a Lexington, Mass., forecasting firm. "We are in the midst of the worst recession in the post-war period, even factoring in a massive stimulus program."

GDP is likely falling at a sharper pace in the current quarter because of widening fallout from the worst financial crisis to hit the country since the Great Depression

Many economists think this quarter could mark the low point of the recession, which is already the longest in a quarter century, having started in December 2007.

Analysts are projecting that the huge plunge in GDP they expect in the current quarter will be followed by smaller declines in the first and second quarters of next year, before the economy starts growing again next summer. If the recession ends in June 2009, as many economists are forecasting, it would have lasted 18 months, making it the longest recession since World War II

Sung Won Sohn, an economist at California State University, said that while the fourth quarter is likely to suffer the biggest dropoff in activity, future quarters could see sharp declines as well, given the shock the economy has been dealt from the financial crisis.

"People who think this may be a run-of-the-mill recession may be mistaken," he said. "Everybody is counting on a massive economic stimulus from the Obama administration, and hopefully that will help, but as time goes on, I am seeing more and more downside risks." …

The 0.5 percent drop in GDP in the third quarter followed a 2.8 percent increase in the spring, a period that was boosted by the distribution of millions of economic stimulus payments

The National Bureau of Economic Research has said that the country slipped into a recession in December 2007. In the October-December quarter of 2007, the GDP was falling at an annual rate of 0.2 percent. GDP then grew by 0.9 percent in the first quarter and 2.8 percent in the second quarter before falling by 0.5 percent in the third quarter.

While a common rule of thumb for a recession is two consecutive quarters of falling GDP, the NBER uses other data to determine when recessions begin and end, including employment statistics…

The recession already is the longest since the 1981-82 slump, which lasted 16 months…

Of course it is still even questionable if we are in a recession. Have we even had two consecutive quarters of decline in a row yet?

But never mind all that.

The bigger the crisis, the more of a hero Mr. Obama will be for delivering us from it.

That is, after he has sufficiently milked it to implement his socialist New New Deal.

This article was posted by Steve on Tuesday, December 23rd, 2008. Comments are currently closed.

17 Responses to “AP: The Longest Recession In 25 Years”

  1. bill says:

    I believe you are right, we have not had two quarters in a row of down GDP, but that doesn’t stop the media from lying.

  2. Colonel1961 says:

    Ugh. Again and again and again…

    So, since the retraction of our GDP was in the noise (0.125%), they had to annualize the rate to 0.5% to make a story. That is correct, right – annualized at one-half percent? A tempest in a teapot. Within the margin of error. Insert your own platitude here: _____________.

  3. 1sttofight says:

    Wasn’t the msm saying the same thing when GDP was increasing at +4%.

  4. crosspatch says:

    We are in a recession only if you redefine recession. And look at the quarter that was down. An annualized shrinkage of 0.5% for the quarter which means the quarter saw shrinkage of 0.125% or 1/8 of 1 percent. Yeah, technically that is shrinkage but it is actually “flat” because when it is flat, it is never really ever at exactly 0%. It might vary a little either side of zero.

    All that said, I am NOT seeing the problems now that I remember during the Carter administration. Does anyone actually remember 10% unemployment? The “Rust Belt”?

    But as usual, we can go here and make known how credible you think the article is. Journalists actually pay attention to places like that. Oh, and he works for the The Washington Post, not AP though AP carried the story and bylined it oddly.

  5. proreason says:

    The article is a pack of lies.

    But when the results for Q4 are published, unless the next few days provide a miracle, the evidence will be that there are 2 consecutive quarters of negative growth. Q4 will be very negative. Q1 is also likely to be very negative.

    So although it isn’t official until it’s official, we are in a recession.

    And it’s a bad one. There is no way the stock market can lose 40% of it’s valuation and companies not layoff a ton of people. Unexmployment might well go over 10%. In addition, there will be millions of foreclosures, which will also be very detrimental to the entire economy.

    I would say the media got its wish, except that the 2 years of wishing was only part of it….the rest is the criminal actions taken by Obamy supporters to get him elected.

    But watch what happens now. The ectasy over the economic turn-around will be orgasmic. The twinge in Chris Matthews leg will become a volcano of optimism.

    And that ecstacy, although it will also be a pack of lies, will actually help the economy, because people form there opinions and take actions based on what the lying media tell them…..just like voting for the Iidiot Obamy.

  6. Odie44 says:

    I just got back from Bloomingdale’s – and the sales manager was looking over a spread sheet as I walked up to pay for me Xmas goods.

    “We are having a great season so far, already beat last Dec as of Sunday morning…”

    Proreason is right – the actual numbers, reality, etc of the economy cannot touch the corrupt MSM and financial markets bombardment of news story perceptions every single day. From day 1 of Bush’s presidency, we have heard how bad our economy has been, 5M new jobs wasn’t really “good”, as long as they could lie about a comparative pulled out of thin air, like Clinton’s fantasy numbers. GDP at 4.5% was “fair”, etc etc.

    I am an earnings junky – and when you actually look at company’s who have nothing to do with the self-made subprime Alt A mortgage meltdown – you see respectable growth across the board.

    But this is the exact perception the MSM wants to create – that Obama is really a savior, who inhereted the “worst recession since the Depression (laughable if it wasnt so funny)”, will be the alchamist we have all been waiting for – and even if he doesnt succeed – will have accomplished enough “traction” to get reelected in 2012.

    Same game book Pelosi used.

    Personally I dont have the liquidity to wait until the 2010 correction, so I will do what I have always done – earn, toil, invest and spend. I don’t need a Finance novice reporting for Reuters to show me the way nor will Obama do anything significant, unless you count taking more of my tax money and leveraging white guilt…

  7. crosspatch says:

    What is killing the economy is accounting, not reality. It is Sarbanes-Oxley that is the root of a small problem growing into a catastrophe. Here’s one reason why. Say I am a lender and I hold 10 mortgages in a city. Say they are for $300,000. One *one* mortgage defaults. Say it is foreclosed on, put on the market and is sold for $200,000. I must now mark every single one of those other 10 mortgages as being worth only $200,000 and count them on my books as a liability *even though* those home owners are making their payments and I am net cash positive, according the the accounting procedures I must show a $900,000 liability. That means that I can’t lend any money because I have no money to lend against even though those other 9 mortgages are not at risk of default.

    Companies are having serious problems with these new accounting procedures and it is causing them to artificially write down assets due simply to accounting rules. They might have loads of cash in the bank that they are not allowed to lend or show as an asset because it is wiped out by other artificial markdowns. These rules are forcing them to show losses when bank balances are increasing. But they can’t lend because according to these asinine rules, they don’t have any assets to lend. What S-OX has done is try to eliminate investor risk by making every balance sheet an absolute worst case scenario. You have to assume that when ONE mortgage defaults, that they ALL will default and when one sells for $200,000, they will ALL sell for $200,000 and so you have to carry these imaginary losses on your books as if they were a reality. So business carries these imaginary disasters on their books and it isn’t long before it creates a real one. If you give your employees an option on stock and the option is $1 and your stock price is $10, you have to take a $9 hit for every outstanding option. You are forced to assume that every single option outstanding will get exercised at the current market price and as your stock goes up, it forces you to take an even larger liability. It acts as a brake on growth. It turns every single balance sheet from “what the reality is today” to “what is absolutely the worst possible thing that could happen” in order to eliminate investor risk.

    So then you have perfectly liquid companies that are cash positive suddenly being “broke” by the new accounting rules when they would have been just fine under the previous rules. AIG suddenly needs to be “bailed out” because on paper it is way under water with huge paper losses yet has billions of dollars of cash in the bank and is taking in more than it is paying out, but can’t use any of that cash because of the paper liability. Same story with Bear Stearns. Cash positive, paper negative.

    One result is that companies are either moving offshore or listing their stock in London instead of New York. Another result is companies going broke when they aren’t.

    • Odie44 says:

      What you are describing is the difference between GAAP and non GAAP reporting – whereas SOx intended for all practices to follow the same rule.

      And if your assumption was true – the actual value of said property , when sold would show a real profit, considering you must factor in a lower tax rate based on your example (200k home is really worth 300k, regardless of “on the books”) and the real value of the home sold.

      Companies are not fleeing to foreign exchanges as listed public entities, if you want to avoid the SOX “turmoil” you go private. More ADR’s have been filed and listed in the past 10 years than the previous 25 years, % wise. And off shore accounting simply allows companies to pay lower corporate tax rates (see Ireland, Scotland, Cayman Islands) and due to certain laws, don’t have to show a carry over loss.

      AIG got invloved in shady accounting years ago, hence why Eli Broad and Hank Greenberg can no longer sit on a public board or serve as public company Directors. They also were knee deep in debt swap assets, which are at a 10 times default rate of actual defaulted mortgages. They , along with others, knowingly kept reselling bad debt for bad debt, taking the commissions for each transaction while hoping no one got caught. They didn’t – a bailout happened instead.

      What you described isn’t even close to the financial issue the world is facing today. Cash is reported on any basic balance sheet – of which analysts would reward. They aren’t, because it isn’t there.

      Remember how people thought it was “funny” the dollar was being devalued by the Yuan and Euro… opps – the greedy foreigners failed to look after their INVESTMENT and are reaping what they sowed. The fact China’s investments in Americna companies and credit is worth 1/3 of what it was 2 years ago is the result of greedy morons.

  8. mrfocus says:

    SG get with THE NARRATIVE. The Messiah is Born!/sarc off

  9. crosspatch says:

    “Companies are not fleeing to foreign exchanges”

    They certainly are.

    Some have asserted that Sarbanes-Oxley legislation has helped displace business from New York to London, where the Financial Services Authority regulates the financial sector with a lighter touch. In the UK, the non-statutory Combined Code of Corporate Governance plays a somewhat similar role to SOX. See Howell E. Jackson & Mark J. Roe, “Public Enforcement of Securities Laws: Preliminary Evidence” (Working Paper January 16, 2007). The Alternative Investment Market claims that its spectacular growth in listings almost entirely coincided with the Sarbanes Oxley legislation. In December 2006 Michael Bloomberg, New York’s mayor, and Charles Schumer, a US senator, expressed their concern.[21]

    The Sarbanes-Oxley Act’s effect on non-US companies cross-listed in the US is different on firms from developed and well regulated countries than on firms from less developed countries according to Kate Litvak.[22] Companies from badly regulated countries benefit from better credit ratings by complying to regulations in a highly regulated country (USA) that is higher than the cost, but companies from developed countries only incur the cost, since transparency is adequate in their home countries as well. On the other hand, the benefit of better credit rating also comes with listing on other stock exchanges such as the London Stock Exchange.

    The impact of SOX on foreign listings was also examined by Piotroski and Srinivasan (2008). They compared new foreign listings onto US and UK stock exchanges between 1995 and 2006. They found no impact of SOX on the listing preferences of large foreign firms choosing between US exchanges and the LSE’s Main Market. In contrast, they find that the likelihood of a US listing among small foreign firms choosing between the Nasdaq and LSE’s Alternative Investment Market decreased following SOX. The negative effect among small firms is consistent with these companies being less able to absorb the incremental costs associated with SOX compliance. This suggests that SOX had a mixed effect on the costs and benefits of a US listing based on characteristics of the foreign companies seeking a listing. [23]

    The Sarbanes-Oxley Act of 2002, courtesy of the Republican Party, cost American companies upwards of $1.2 trillion. The capital flight it initiated caused the London Stock Exchange to become the new hub for capital markets[34]

    21- http://www.senate.gov/~schumer/SchumerWebsite/pressroom/special_reports/2007/NY_REPORT%20_FINAL.pdf
    22- http://papers.ssrn.com/sol3/papers.cfm?abstract_id=876624
    23- http://papers.ssrn.com/sol3/papers.cfm?abstract_id=956987
    34 – http://worldnetdaily.com/index.php?pageId=57617

    The above from Wikipedia.

    You might also want to read T.J. Rodger’s recent article at Pajamas Media. He says he can’t even make sense out of his balance sheets anymore. He has to show he has no cash when there is cash in the bank. It just gets eaten up by paper “liabilities”.

    Also see: http://online.wsj.com/article/SB122990472028925207.html

    Sarbanes/Oxley is absolutely killing our economy. What it does is amplify downturns by making accounting rules that exacerbate any reduction in value of assets. It is great when you have an expanding economy and you want to control hype. It is a disaster in a declining economy as it acts to accelerate the decline.

  10. proreason says:

    Mark to Market accounting is exacerbating the economic problem because it is forcing artificially low valuations which increase captital requirements.

    But it isn’t the biggest factor.

    The biggest factor is government intervention, particularly interventions that force uneconomic actions. Notably, CRA, and many of the bailout actions.

    If accounting were the main problem, the accounting could have been easily changed months ago. and besides, sox has been around for years.

  11. BillK says:

    With retail sales numbers to be coming soon (“Christmas sales a disaster for retailers” is likely to be the headline), one problem with sales numbers is they’re based on prices and don’t take into account falling prices.

    I’ve mentioned this before, but last year a 50″ plasma HDTV may have cost $3000. This year they cost $2400.

    That means if last year a store sold 100, this year they’d need to sell 125 just for their sales numbers to remain “flat.”

    Couple this with the massive sales stores have been having to drive traffic, and more net goods are being sold, but at lower prices.

    Thus a drop in sales numbers are a self-fulfilling prophecy when your store has been offering “30% off everything!” or more since December 1.

    This is the same reason why in many areas real estate sales are “down” – because the price of homes has fallen, even if more homes are sold sales will be reported as “down.”

    • GuppyNblue says:

      They do the same with the numbers for unemployment applications. Exaggerate the hell of them but ignore the numbers in the want ads.

  12. wardmama4 says:

    Not only that but people like me – who purposely take temporary jobs once or twice a year (or decade) skew the numbers all over the place. I hated that the last job I took in the 90s – for a whole 3 weeks – was counted as full time mother with children under 18 – for that quarter.

    I don’t register on the unemployment stats because I’ve not ever been employed long enough to qualify – but I’m sure many of the ‘registrations’ and ‘forms’ I fill out – log me into that catagory (most especially when the liberals need to use it against a sitting POTUS or to magically make all things better once their guy gets in).

    Personally – I am still not (purposely) employed – and we are having a banner year and most especially a banner Christmas. Second car for the holidays and all.

    Take that you socialist wanna be liars and enabling msm.

  13. crosspatch says:

    Some awesome economic news out today. Consumer spending was up in November. Consumer confidence and “sentiment” whatever that is was also up. Durable goods orders were down 1% but if you take out cars and airplanes, durable goods were up. Most amazingly, new mortage requests were up (wait for it) some 48% last week over the week before and were up something over 400% from the same week last year. Again with the exception of the auto industry, corporate spending was higher than expected, too.

    Overall I am seeing all indications of a bottom forming in the market. It sure looks to me like things bottomed around the 20th of November and are currently building a base. It might not be until Q2 of next year before we see a full-on rally but I believe one is coming sooner rather than later. Government can’t dump free money into the economy without heating things up.

    The automotive industry is the real sore spot. Nobody knows what kind of car to buy. Should you buy one that’s frugal on gas even though oil prices are low and forecast to stay low for at least another year or so? Or should you get something a little more useful but not as easy on fuel? After the whipsaw we have taken over the past year or so in oil prices, it is no wonder the public is skeptical of today’s prices and is in a “wait and see” mode.

    I also don’t see the car companies acting in the sales area with any real desire to sell cars. I mean, I am currently in the market for a car. I heart is with Toyota but I looked at GM and Ford (Chrysler just doesn’t have anything that interests me right now). Neither of them were offering any deep discounts on their product or anything like 0% financing on any of the models I am interested in. Toyota offers 0% financing on 11 models. GM did have 0% financing on some models … after they raised the base price of the vehicles.

    Toyota and Honda are the only ones acting like they want my business.

  14. crosspatch says:

    Good article at Pajamas Media by Tom Blumer that reflects the same conclusions I have come to.

    But there are early, tentative signs that the economy is getting up off the mat.

    Good news “too soon” would be bad news for the massive $850 billion stimulus package Obama and the Democratic Congress wish to pass. If a recovery has visibly commenced, who, besides their pork-addicted constituencies and the endless line of bailout beggars who should know better, will need stimulation?

    Obama, Biden, and the Democratic Party are engaging in their sharply negative jawboning on the economy for the same reason a mob hit man sends a person he knows to attend his target’s funeral: he wants to make sure he’s dead. Obama et al. want to make sure the economy seems dead, and that consumers don’t do something unhelpful like start spending again, until shortly after their party’s precious stimulus package becomes law — after which they, with the help of their lapdogs in old media, will joyously announce a resurrection.

  15. 1sttofight says:

    As soon as the majority of Americans realize that what the MSM reports is nothing but liberal lies, the better off we will all be.

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