Recession and unemployment

When your neighbor loses his job, it is a downturn in the economy. It is a recession when you lose your job, and a depression when an economist loses his job. That is a standard joke in economics on how these terms are used. It is a joke that quickly highlights the rather arbitrariness when it comes to how these terms are used.

It certainly is looking and feeling more and more like a nasty recession. Of course, economists are yet to lose their jobs in huge numbers, which means the current economic situation is far from being a depression.

From the Economist:

America’s jobless rate hit 6.1% in August, up from 4.7% a year earlier, and within spitting distance of its peak of 6.3% during the previous recession after the dotcom bust. ..... A rise in unemployment is a good signal that growth has fallen below potential. Better still, it matches the definition of recession that ordinary people use. During the past half-century, whenever America’s unemployment rate has risen by half a percentage point or more the NBER has later (often much later) declared it a recession. ...