Deep Dive
Shownotes Transcript
I am rolling. Hello, everyone. I'm Kimberly Adams. Welcome back to Make Me Smart, where we make today make sense. I'm Kyle Rosdahl. Thanks for joining us on the pod, everybody. Thursday, May 1. We are going to play some audio clips today, but we are going to answer a very pressing listener question. A lot of you had asked us about this of late.
And Rachel in Texas is the one whom we're going to name. And the question goes like this. The term recession has been thrown around so often lately. Can you make me smart about how a recession is truly defined? Also, who's the one that actually declares recession in Michael Scott's bankruptcy voice? I didn't do the office, so I don't know Michael Scott's bankruptcy voice, but you know.
I feel like this is your wheelhouse. You go ahead, Kai. All right. So it used to be once upon a time and not actually all that long ago that it was two consecutive quarters of negative GDP growth. That is to say a shrinking economy for two quarters, six months. That is no longer the operative case now in the past like decade or so.
There is a group called the Business Cycle Dating Committee of the National Bureau of Economic Research, which decides ex post, that is to say after the fact, when a recession started and when it ended. And their definition of a recession is significant, widespread declines in economic activity lasting more than a couple of months. So significant is obviously that self-explanatory. It's a big deal. It's rising unemployment. It's slowdown in economic activity.
Right. It's people not buying stuff widespread across the economy throughout many sectors lasting more than a couple of months. And they wait until the business cycle has troughed and peaked again before they actually figure or actually peaked and troughed before they explain what's going on.
I want to really lean into that widespread across many economic sectors, because one of the things we saw after the pandemic as we were sort of climbing out of it, we had little mini recessions in different sectors. Like where, remember for a while, like the tech industry was in like a little mini recession. Manufacturing was in a recession for a while, or people called it that.
But it didn't meet the definition of a recession because it was sector specific. And so other sectors of the economy could sort of absorb the economic shocks that individual sectors were feeling. And so that's why it wasn't sort of like a big widespread situation. Exactly. More Kimberly said.
Yes. So, you know, we're not going to know until after the fact, but that doesn't mean people won't feel it or throw the term around a ton. Totally. Sorry. Wait, let me just say one more thing. We are not in a recession right now. That's important to understand. We're just not. But would we know until after? Well, yeah, because, yeah, because unemployment is going to come out tomorrow. Right. And the unemployment rate will be steady-ish. The number of jobs will be steady-ish and steady-ish does not a recession make.
Well, there you go. All right, let's get to some audio. As you know, I'm still in Canada this week reporting on the elections at first and now some stuff about the trade war. And I've been talking to a ton of people about, you know, how things are feeling for them, how the trade war is playing out in various parts of the Canadian economy. And obviously, Trump's tariffs have come up a lot. But it's not
always the tariffs themselves that people say are causing the problems. It's the uncertainty. One of the people I talked to at a polling place here, it was named Scott Irvine, and he owns a cheese shop in Collingwood, Ontario. What we sell are luxury items. And when people tighten up, you know, luxury items, one of the first things to go. So not necessarily tariffs, but the economy has not been great for a while. We've had to raise prices.
And our customers come in and they say, you expect me to pay this for this? And we have no choice. And, you know, they're pretty blunt about it.
Yeah, he told me that since he mostly imports his cheeses from Europe, he's not feeling the tariffs, you know, on U.S. goods so much. But this overall uncertainty really is affecting his customers and making them pull back spending. He told me that average sales per customer are down like 10%.
Now, he really was blaming the liberal government for sort of long term economic decline. He was planning to vote conservative. Obviously, they didn't come out on top in this election, but he was very skeptical that the liberal government was going to do much to improve the economy. Yeah, I do think it's interesting, as Professor Groff pointed out to us the other day, the liberals have been in power for nine and a half years now. They just got another mandate.
And there are serious domestic economic concerns that are not Trump related that they're going to have to deal with. And that's going to be a super big challenge for Carney now, I think. Yeah, it is. Immigration was the one that has been coming up a ton in conversations here and housing prices. Yeah. Yesterday, President Trump at the White House defending his tariffs on China. Shocking. I know. He said they're working because Chinese exporters are feeling the squeeze. And then he said this.
They made a trillion dollars with Biden, a trillion dollars, even a trillion won with Biden selling us stuff. Much of it we don't need. You know, somebody said, oh, the shelves are going to be open. Well, maybe the children will have two dolls instead of 30 dolls, you know.
And maybe the $2 will cost a couple of bucks more than they would normally. Okay. Number one, oh my God. Number two, we send the Chinese a trillion dollars. They send us a trillion dollars worth of stuff. Maybe a trillion won. That's the way it works. They don't make a trillion dollars. They send us a trillion dollars worth of stuff. Sorry. That just, it really irritates me every time. But more importantly, the whole $2 instead of 30 and maybe a couple of bucks more, consumers...
Being able to purchase fewer goods at higher prices is a decline in real income. And when you get aggregate decline in real income, you get a recession. Now, I know I've said on this program before that Janet Yellen told me once that Donald Trump doesn't understand macroeconomic policy. But, oh, my God, he doesn't know what he's doing.
So I have a perfect example of exactly what you just said about consumers being able to buy fewer things at higher prices. So my mom is getting ready to have like a big milestone birthday party, right? And it's going to be a huge party because you know my family, we do things big. And she wanted this specific type of party favor and needed like
200 or 300 of them. And I was like, look, we got to get these things ordered before the tariffs kick in because of course they're coming from China. So we put in the order through Amazon and it was going to be like $1,200, right? Bunch of party favors. And
And I look at the ship date and it said it was going to arrive between April 28th and May the 3rd. And I was like, I don't know if it's going to make it, man, but we're going to try, right? Because it's supposed to kick in on what, like May 2nd, right? Or at least some of the tariffs, whatever. So I'm watching the shipment. It says it's packed. It says it's shipped. Then two days ago, I get an email from Amazon. They've canceled my order. Yeah.
Completely canceled the order. Didn't even attempt it. So then my mother went back and tried to buy them again, couldn't find them, and ended up buying a different product but could only buy like 150 of them instead of the 200, 300 she wanted, and that's going to cost her $2,000. Right. So multiply that across 350 million people in this economy...
Yeah. That's what it looks like. That's what it looks like.
All right. Our last clip for today speaks to something that you guys were talking about on yesterday's show, which is how a surge in imports caused yesterday's GDP report to look really bad. So Marketplace's Stephanie Hughes was reporting on how investment in computers shot way up during this period, 113% higher than the previous quarter, and how that could be seen as a good or a bad
thing. Now, here's what Carleton College economics professor Ethan Strube told Stephanie. Sort of optimistic view, right, is that this is an investment in the ability of, you know, businesses to keep doing business regardless, right? So that, you know, they're not going to be, even if computers get much more expensive, they've already bought them. They don't need to worry about that. The pessimistic view, right, is again, you know, this is defensive. It's not really investment in producing new stuff. It's more like
creating some excess capacity to absorb, you know, changes in prices down the road. Now, the reason Stephanie flagged this clip for us was because she was pointing out that the last time investment in computers was this high was in 1983, more than 40 years ago. And so companies are definitely trying to get ahead of these tariff-related price hikes.
But it's also important to note that we are a services-driven economy. And so since a lot of those services are things that people do on computers to create value for others, you know, investing in computers pretty much makes sense.
Yeah, that was a nice piece Stephanie did for us yesterday. That was a really nice piece. Yeah. Okay, that's it for Thursday. Back for Economics on Tap tomorrow. Are you back stateside tomorrow, Ms. Adams, or are you still gallivanting around the Great White North? I will be gallivanting around near the Toronto airport around happy hour time tomorrow. But I will be joining Economics on Tap from probably some airport bar, but we'll see. All right. 3.30 Pacific, 6.30 Eastern. More news, drinks, and a game.
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