Did a recession start in 2007?

Some people insist that the U.S. economy was already in recession at the close of 2007. My conclusion is that it is fairly unlikely. The latest Federal Reserve Beige Book that covers the period from mid-November through December tells us that:

Reports from the twelve Federal Reserve Districts suggest that economic activity increased modestly during the survey period of mid-November through December, but at a slower pace compared with the previous survey period. Among Districts, seven reported a slight increase in activity, two reported mixed conditions, and activity in three Districts was described as slowing.

That strongly suggests that the U.S. economy was not in recession at the close of 2007.

There seems to be some consensus that Q4 real GDP will come in around 1.5%, but I continue to believe that it will come in somewhere between 2.5% and 3.5%. Even if you believe that December was somewhat weaker, October and November were fairly decent. Hence, no recession in Q4.

We will not get the consumer spending report (Personal Income and Outlays) for December until the day after the upcoming FOMC meeting (Thursday, January 31, 2008). We already know that the December employment report was slightly positive (subject to significant revision of course) and that Industrial Output was flat (also subject to revision.) So, unless the revisions head south, it already appears that the U.S. economy was not in recession even on a monthly basis in December.

-- Jack Krupansky