Just don't say the R word

There is really no useful definition for recession. It is decided by the economists at NBER by looking at the GDP numbers for the past two quarters. If the GDP shrank for two consecutive quarters, the NBER declares we were in recession. By this definition, we can only look back and say we were in recession, we cannot say whether we are in a recession or will enter into recession.

So what it means really does not matter for what is ahead of us.

But not to the policy makers from both sides, who either use it do label the current situation or produce every possible explanation for why we we are not in recession. Lazear, White House Economist, has this to say:

"I would be very surprised if the NBER, looking back at this period, would date this as a recession," Mr. Lazear said. There are even indications that revised first-quarter estimates would be slightly stronger than 0.6%. "The optimists seem to have been closer to right on that than the pessimists," he said.

While 0.6% is not much of a growth, by NBER's definition the economy was not in recession. But we should ask what contributed to this growth and how healthy is this growth?
As I wrote before, the growth came from inventory build up. Not a good sign. I believe Lazear realizes this as well as he predicted a flat growth for the next period.

The problem is not whether the economy will shrink or stay flat, the increased inventory is going to cause cut downs in production and will lead to hiring freeze. An increase in unemployment rate is a bigger problem than whether or not NBER should retrospectively label this period as recession.