March 11, 2008
Vol. 23 , No. 06
The Recession of 2008: Myth or Reality
S. BROCK BLOMBERG
TOM BORCHERDING, moderator
MONDAY, FEBRUARY 11, 2008
LUNCH 11:30 a.m., LECTURE 12:00 p.m.
On January 12, 2008, the Los Angeles Times reported: “Increasing fears that the nation is headed for a recession – or, indeed, may already be in one – drove the stock market sharply lower Friday, closing out a third straight losing week.” Most students at CMC spend their entire college career without experiencing an economy wide recession. While recessions are rare, they do not just strike fear into the hearts of graduating seniors. Apart from those losing their employment and those being unable to find a job, there are other factors often overlooked by the general public which are characteristics of an economic slowdown. This includes an increase in crime rates, rates of mental illness and cases of domestic violence, slower movements up promotion ladders, a lower probability of finding a summer job for teenagers, higher levels of application at graduate schools, etc. There is much talk currently, both amongst academics and in the popular press that the economy already is in recession. Indicators are the recent sharp increase in the U.S. unemployment rate from 4.7% to 5.0% for the most recent month for which observations are available, a significant shortfall in tax receipts, the very low levels of consumer confidence, a sharp decline in housing sales, and so on. There are also some suggestions that this recession will be more severe than the previous downturns of 1990-1991 and 2001. Concern about banking sector strains, which stand at their highest levels since the 1980s, have added extra impetus to Federal Reserve rate cutting. Starting dates for recessions are officially determined by a dating committee of economists at the National Bureau of Economic Research (NBER) in Cambridge, MA. However, the NBER typically only agrees on the starting date well after it has occurred. Hence the question lingers whether or not the U.S. Economy is already in a recession, or if it is about to go into a significant slowdown in economic activity. We have gathered a distinguished committee of macroeconomists from CMC and CGU to address both the current economic difficulties and responses by the Federal Reserve and other actors. Professor Tom Borcherding (CGU) will function as moderator, while the panel includes Dean Greg Hess (CMC), Dean Tom Willett (CGU), and CMC professors S. Brock Blomberg and Manfred Keil.