Charlie Sykes, economic illiterate

Charlie Sykes, desperate to spin the economy as being healthier than it is (he clearly remembers that "It's the economy, stupid" rendered George H.W. Bush, a better man than his son, a lowly one-termer), hailed the upward revision for second quarter gross domestic product today. The initial estimate pegged GDP growth at 1.9%. The revision put it at 3.3%.


Now, let's leave aside for the moment the fact you can't eat GDP and there are questions about its value as an indicator of overall economic health. Or the fact that government stimulus checks were a significant driver of personal consumption isn't something that should warm the invisible hand of a supposed free marketeer like Charlie Sykes. Or the fact that quite a few economists are dour about the outlook for the remainder of the year as the mortgage crisis steps into a new phase and financial institutions are holding liquidation sales on their assets.


Leave all that aside. The thing that marks Charlie Sykes as an economic illiterate is that when he tried to explain what a recession was to his listeners he said it was economic contraction (not his words) for "a number of quarters." A "number"? Try two consecutive ones. Shouldn't Charlie know that? One might think that Charlie is being deliberately obfuscatory (i.e., should the next quarter go south Charlie can say "Nothing to see here, it's only one quarter, a recession is a number of quarters of contraction.") But the Brawler isn't sure. He recalls Charlie earlier this year defining a recession as three quarters of contraction.


And, of course, the two consecutive quarters of decline isn't technically the definition of a recession anyway. At least not according to the National Bureau of Economic Research, which, after all, calls recessions.


From the NBER web site:

Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. The most recent recession in our chronology was in 2001. According to data as of July 2008, the 2001 recession involved declines in the first and third quarters of 2001 but not in two consecutive quarters. Our procedure differs from the two-quarter rule in a number of ways. First, we consider the depth as well as the duration of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in economic activity." Second, we use a broader array of indicators than just real GDP. One reason for this is that the GDP data are subject to considerable revision. Third, we use monthly indicators to arrive at a monthly chronology.

So, Charlie, who's fond of talking about "unintended consquences" and pretends to know how markets work, reveals himself as a buffoon to anyone who listens. But you already knew that.