A recent poll on CNN.com reveals that 74% of all Americans believe that the US economy is in a recession, and nearly 90% of self-identified Democrats believe it so.  However, what that poll doesn't ask is what percentage of those polled actually know what the definition of a recession is, or on what specific economic indicators the recession opinions are based.

Certainly the economic news has been mostly negative over the past several months.  The collapse of the "sub prime" mortgage market and prices in certain housing market has had repercussions throughout the economy.  Economic growth, while strong through most of last year, ground to a near halt in the 4th quarter, growing by only 0.6%.  According to the preliminary reports from the Department of Labor, the payroll employment report (one of two different employment reports undertaken by the Labor Department; the finalized payroll report and the household survey results were not available at the time of this posting) showed a net loss of 63,000 jobs, following a January loss of 22,000 jobs.  The dollar has hit all-time lows against the Euro and 14-year lows against the Japanese Yen.  Producer prices as measured by the Producer Price Index, were up, stoking inflation concerns.  Just this past weekend, venerable investment bank Bear Stearns was swallowed up by JP Morgan Chase in a deal facilitated by the Federal Reserve and the Treasury Department (although not funded by the government nor a "bailout" of Bear Stearns, as it is widely described).  Home foreclosures are up.

All the economic news is not negative, however.  The 4th quarter 2007 growth, while not stellar, was the 25th consecutive quarter of economic growth since the 3rd quarter of 2001 — the quarter in which 9/11 occurred.  The unemployment rate fell slightly between December 2007 and February 2008, from 5.0% to 4.8% (the 60-year average for US unemployment is 5.6%).  The net job losses followed 52 consecutive months of job increases; from September 2003 to December 2007, nearly 8.3 million jobs were added to the economy.  Hourly wages were up for the 53 consecutive month in February, and productivity rose as well.  Consumer prices as measured by the Consumer Price Index remained steady, and exports increased.

[Note:  All economic data presented are official government reports available at www.bls.gov and www.bea.gov.  All referenced wage and GDP data are presented in constant-dollar terms to discount the effect of inflation.]

So the data would suggest that while there are real problems in the economy, it certainly isn't in dire straits.  But lost in all the numbers is a simple question:  exactly what is a recession?  Campaigning for President in 1980, Ronald Reagan used to joke that "a recession is when your neighbor loses his job, a depression is when you lose yours, and recovery is when Jimmy Carter loses his".  Given the double digit inflation, interest rates, and unemployment rates that characterized the mid-to-late 1970s economy, that was an apt description.  Economists, however, have a more specific definition:  a recession is two consecutive quarters of negative economic growth, what Seinfeld's George Costanza might call economic "shrinkage".

In 2000 and 2001, negative economic growth occurred in 3 of the 8 quarters; however, none of the negative quarters were consecutive.  Therefore, while the economy was certainly not strong following the tech bubble burst, there was not a recession under the official definition.  The last actual recession occurred in the 4th quarter of 1990 and the 1st quarter of 1991.  Unemployment peaked in June of 1992 at 7.8% (it has not been higher than 6.6% since then).

So if people do believe we are in a recession, what is the basis?  It is possible that 1st quarter 2008 GDP growth will be negative; if the economy shrinks again in the 2nd quarter of 2008, then the poll respondents are correct:  we are in a recession at this moment.  However, the data are at best inconclusive in this regard, and the earliest we could make a definitive recession claim would be when the 2nd quarter numbers are released — in July.  An interesting side question to the polling would be whether or not the respondent knows the actual definition of a recession, and on what specific economic indicators are they basing their decision.  Of course, that would require facts rather than pure opinion, and who needs facts when we can take a poll?