Did Greenspan really warn of a recession by the end of the year?

Did Greenspan really warn of a recession by the end of the year? The simple answer: No, he did not. Read the AP press report yourself. Clearly the AP reporter was more than a little sloppy with their wordsmithing and their own choice of language, but here are the key quotes from Greenspan (at least as they were reported):

When you get this far away from a recession invariably forces build up for the next recession, and indeed we are beginning to see that sign... For example in the U.S., profit margins ... have begun to stabilize, which is an early sign we are in the later stages of a cycle... While, yes, it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008 ... with some slowdown.

To emphasize, Greenspan himself did not forecast a recession in late 2007 and didn't even "warn" of such a prospect. In fact, he didn't warn of or forecast a recession in 2008 either. Also note that "slowdown" is not the same as "recession". Q3 and Q4 of 2006 were a "slowdown", but not a recession.

Granted, we do not have the full text of Greenspan's remarks, but you can be sure that reporters will latch on to anything remotely resembling a juicy soundbite, so if Greenspan had warned of an imminent recession, it would have gotten reported with the relevant quotations.

I would simply add that Greenspan would be the first to admit the economic forecasts many months out tend not to be reliable indicators of the actual economic activity that will transpire. In fact, as the AP story reports:

Greenspan said that while it would be "very precarious" to try to forecast that far into the future, he could not rule out the possibility of a recession late this year.

Not "ruling" something out is never the same as forecasting it or warning of it. Usually, in common usage, the phrase "could not rule out the possibility" is a caveat, not a primary statement of belief or forecast. In fact, all he is really saying there is that the end of the year is too far away to reliably forecast what will be going on out that far. Greenspan's own phrasing of "very precarious" clearly indicates that he is cautioning people to be more than a little wary of attaching too much of a sense of certainty to longer-range economic forecasts.

-- Jack Krupansky