Are we in a recession or not? Seems like a simple question, but answers are all over the board. 517 Magazine reached out to a pair of Michigan-based economic experts to get their take on what has happened, is happening and has yet to happen to our economy. Here are some of their responses to a few fundamental questions.
Is a recession underway?
Charley Ballard, professor of economics at Michigan State University: The U.S. economy is not in a recession, at least not yet. Some folks use a very crude rule of thumb, saying that a recession occurs when real gross domestic product decreases for two consecutive quarters — as it has. … For us to be in a recession, the economy needs to be in a broad retreat, which can only be seen if we look at multiple indicators. The most widely respected group that makes the call on recessions is the Business Cycle Dating Committee of the National Bureau of Economic Research, a private think tank.
Donald Grimes, regional economic specialist at the University of Michigan: What I think is interesting is that the committee is very slow. In the 2001 recession, they did not say that we were in a recession until November 2001, which is when they later declared that the recession was over.
Are we headed for a recession, then?
Ballard: A recession at some point in the next year is a real possibility. The Federal Reserve is clamping down on credit in its effort to tame inflation. The challenge for the Fed is to wring inflation out of the economy without tipping us into a recession. That is not easy to do.
Grimes: My guess is that you will need to see a steady decline in month-to-month wage and salary employment in the U.S. before the NBER starts to think about calling a recession. … Even if we don’t fall into an official recession, it will continue to feel like one to a lot of people as their real income continues to decline.
What would a recession mean for Michigan’s economy?
Grimes: Michigan usually suffers more during a recession than the country as a whole. … However, because of the shortage of vehicles to purchase over the past two years, there is a lot of pent-up demand for new vehicles, so there is a better than 50% chance, I think, that Michigan would do better than the country as a whole if we went into a recession this year or next year.