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Recession ahead? It's a difficult call

Sometimes you have to wonder if we live in the same country as the federal government's statisticians. They say the economy grew fabulously last quarter - at an annual rate of 4.9 percent. We see call center closings, government cutbacks and streets lined with "for sale" signs. In my business, an advertising slump has newspapers singing the blues. But pay a weekend visit to the mall and you'll see shoppers lined up to hand over their money.

By Helen Huntley, Times Personal Finance Editor
Published December 16, 2007

Sometimes you have to wonder if we live in the same country as the federal government's statisticians. They say the economy grew fabulously last quarter - at an annual rate of 4.9 percent. We see call center closings, government cutbacks and streets lined with "for sale" signs. In my business, an advertising slump has newspapers singing the blues. But pay a weekend visit to the mall and you'll see shoppers lined up to hand over their money.

We live in confusing times. Housing and anything related to it are clearly in recession, while exports are booming thanks to the cheap dollar. Higher insurance premiums and gas prices may have you eating peanut butter sandwiches, but your neighbor may be spending more than ever on steaks and sushi.

The official definition of a recession is two quarters of decline in gross domestic product (also known as GDP). That means that we're not in an official recession regardless of anecdotal evidence. It also means that by the time we know for sure that we are in a recession, it might be over.

Most economists are predicting a slowdown in growth rather than a decline. Standard & Poor's chief economist, David Wyss said last week that housing is the only major weakness; the rest of the economy is growing at an annual rate of 3.5 percent. Some sectors are even growing faster than projected, such as consumer staples, health care and industrials. However, the Federal Reserve is worried enough about the future that it reduced interest rates again Tuesday, trying to stimulate the economy.

I'd say we stand on the brink. I asked readers, many of them from the Times Money Panel, what they think. Are we headed for a recession? Not surprisingly, those who had made up their minds on the subject were fairly evenly divided. That's part of what makes me think it really could go either way. Here's what some of them had to say:

A RECESSION IS IN THE CARDS

When I feel that I need to be working two jobs so that my family is comfortable, then yes, we are in a recession.

Tim York, Holiday

The subprime market losses are the major reason for the economic slowdown we are experiencing and our economic malaise is further aggravated by the cost of oil.

Jim Bedard, Palm Harbor

U.S. corporate profits are in a recession and the entire economy is not far behind. Slower sales and higher energy and labor costs are forcing companies to reduce spending and hiring.

Dave Kelly, Sun City Center

With all the money that we are wasting in Iraq, I do believe that this country is in for hard times for a very long time. And with all the outsourcing that we are doing, where will the people work and earn a living?

Rose Marie Plante, Clearwater

Whatever you want to call it, I see a significant slowdown. A multisided punch of out-of-control credit card debt, fuel costs and subprime lending will weigh on us for another year.

John Papvero, Bay Pines

I most definitely think this country is headed for a recession. Everywhere you look and listen you can feel it. I hear it from our customers, some who have been in business for over 15 years "man this is the worst it's been in a long time." Every other week you hear about another company closing and having huge layoffs. When you take enough people out of the spending stream, it is going to catch up with every type of business.

Nancy Spena, Port Richey

The cost of oil plus ruthless competition from China and India will cause us to have to greatly adjust economic expectations and with that comes a declining standard of living.

James Nannen, St. Petersburg

WE’LL AVOID A RECESSION

The baby boomers are retiring, so anything and everything that they spend their money on will help the U.S. recover from the housing market fallout.

Valerie Miller, Pinellas Park

Oil prices should moderate in 2008. Retail spending may be higher than projected. The auto industry may provide a slight stimulus. Corporate profits could actually re-accelerate. We are stronger and more capable than given credit for.

John McBaine, Indian Shores

I work in retail and they can publish all they want about how consumers will be watching their pennies this year. I can tell you they are spending huge amounts of money on Christmas. Our sales and profits are up.

Sandra Novak, Port Richey

The U.S. economy is still healthy and strong. The recent financial credit crisis may have slowed down our economy somewhat, but as long as American jobs are still there, people will continue to freely spend.

John Jung, St. Petersburg

Our lower valued dollar is attracting foreign investment now. I also believe the demand for new construction will continue. These factors plus continued high levels of employment will prevent a recession.

Eric Rhodes, New Port Richey

A recession I see as not likely based on the GDP figures and most importantly, the euro and Japanese yen. It will be a challenge for the U.S. with tighter and at times unrealistic credit policies currently in place.

Paul Dufour, Tampa

[Last modified December 14, 2007, 21:26:46]