WASHINGTON — Are we in a recession?
Everyone from nervous workers who fear that they could lose their jobs to Wall Street whizzes who've experienced wilder dives and surges than a theme-park ride are worried that the U.S. economy could tank.
President Bush, Treasury Secretary Henry Paulson and Peter Orszag, the director of the nonpartisan Congressional Budget Office, don't think we're in a recession, and they don't think we're approaching one.
"Our economy is structurally sound, but it is dealing with short-term disruptions in the housing market and the impact of higher energy prices. These challenges are slowing growth," Bush said from the White House on Thursday. "Yet Americans can also be confident about our long-term outlook. Our economy is strong, it is dynamic and it is resilient."
But in the Swiss Alpine resort city of Davos, the respected head of Mexico's central bank, Guillermo Ortiz, said this week that he thinks the U.S. economy has slipped into a recession.
Mexico is a de facto production arm for many U.S. corporations, and slowdowns in assembly plants there would point to falling U.S. demand for consumer goods.
"The U.S. economy is already in recession, and its effects could last for a (long) time," said Ortiz, from the sidelines of the World Economic Forum, held annually in Davos.
Who's right?
The answer depends partly on which definition you choose. The textbook definition for a recession is two consecutive quarters — six months — of negative economic growth. Under this definition, the earliest we'd know is late June or July.
The National Bureau of Economic Research, which provides the dates for recessions after the fact, works off a broader definition. It defines recession as a "significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP (gross domestic product), real income, employment, industrial production and wholesale-retail sales."
By that definition, mixed economic indicators now point to a slowdown, but not recession.
Economic growth is slowing, but the weak dollar has boosted exports and that's helped offset some of the drag from the housing slump.
Recession worries shifted into high gear when December employment numbers showed an anemic gain of 18,000 jobs. Weekly job data since then suggest a more robust hiring picture.
Industrial production has been sluggish, but the National Association of Manufacturers on Wednesday issued an economic forecast that predicted 1.4 percent growth during the first half of 2008. That's not recession. The downturn in the housing and automotive sectors hit manufacturing jobs last year, but the rest of the manufacturing sector grew by 18,000 jobs. NAM projects manufacturing employment to drop by 90,000 jobs this year.
Housing continues to be the biggest weight on the U.S. economy. The National Association of Realtors reported Thursday that sales of single-family homes fell 13 percent in 2007, the second biggest decline ever.
The more troubling news was that median prices for single-family homes fell 1.8 percent last year to $217,800. It was the first time since the realtors group began keeping records that home prices have lost ground and it's believed to be the first time that's happened since the Great Depression. New-home construction also fell last year, by almost 25 percent.
The good news is that many economists believe the bottom must be somewhere in sight after a nearly two-year housing slump.