The Recession is A Year Old

Yes, we have been in a recession for a year—even though real GDP is up. The current downturn began in December 2007, according to the National Bureau of Economic Research.

Part of the reason why we are in this mess is that GDP and productivity growth looked reassuringly high in most of this decade. That helped convince banks to keep lending—even as real wages were falling—and reassured the Fed that everything was okay.

For the foreseeable future, globalization will distort real GDP growth so much that it is no longer a reliable guide for policy. If it feels like a bad slump, it is—even if GDP says differently