A Politically Neutral `Recession'
THE common economic definition - two consecutive quarterly contractions - having been met, the recession of 1990-91 is officially declared. Politically, though, it's still nowhere to be seen. The president and his party usually see their political standing fall during economic downturns. Now, however, George Bush is more popular than he was last July, and the Republican position is at least as strong. Indices that purport to measure consumer confidence showed a steep decline over the latter six months of 1990 - but then recorded a big recovery early in 1991, even though no real signs of an economic upturn could be seen. And at no point since last July have most other readings of the public's economic mood picked up pervasive, politically consequential pessimism with regard to either the nation's business or personal finances, common in past recessions.
In its survey of April 10-11, for example, Yankelovich Clancy Shulman found 39 percent of the public describing the country's economy as good, 59 percent as poor - hardly bullish but not deeply pessimistic either. Forty-two percent expected the economy to get better over the next 12 months, only 15 percent to get worse. In another early April survey, Gallup found that only 33 percent said they were worse off financially than they had been a year ago; in February 1990, before the recession had begun, 26 percent said they were worse off than a year earlier.
One reason, of course, why today's mood isn't ``recessionary'' is the nation's response to the Gulf conflict. Backing for the Bush administration's handling of the crisis was strong from the very outset last August.
A country's mood is a complex thing. Except at the extremes of unparalleled growth and deep recession, economic performance competes with various other factors in shaping it. Surveys done during the Gulf conflict and in its immediate aftermath make clear that even questions asking about strictly economic outlook may get substantially more optimistic responses following non-economic events that produce upswings in overall mood.
The public's attitudes to the current recession, and hence its political impact, also differ from the norm because of the way the downturn has been reported. Again, the Gulf crisis is a big factor: For most of the time since last August, international developments have pushed the economy off Page 1 and off the lead on TV news.
But there's another very different reason why the political impact has been unusually limited: The downturn itself has been mild. The March unemployment rate of 6.8 percent, while the highest in several years, stood a hair below the level in the fall of 1984, when Ronald Reagan was hugely reelected. Long-term unemployment (15 weeks and over) has climbed by some 800,000 from the low recorded in 1989, to just over 2.2 million. But this rise is not even remotely comparable to that of the previo us recession, when long-term unemployment surged from 2.1 million (May 1981) to a high of 4.7 million (December 1982).
Similarly, while current GNP performance is hardly robust, it's not nearly as negative as recent accounts have suggested. It's not even certain that, properly measured, real GNP has had the two consecutive quarters of decline that define a recession.
The Associated Press account of the first quarter GNP decline, echoed in other reporting, stated that ``the United States sank deeper into recession in the first three months of 1991 as the economy shrunk at a 2.8 annual rate....'' In fact, government figures showed the national produce growing in terms of current dollars by 2.6 percent over the quarter. The 2.8 percent decline was arrived at by factoring in the effects of inflation - measured at 5.5 percent, using the implicit price deflator. This meas ure showed inflation jumping from its 2.8 percent level of the last quarter in 1990.
In fact, no one thinks inflation has been rising. The other widely used inflation measure, the consumer price index, put inflation at an annual rate of less than 3 percent for the first three months of this year. Even the AP story dismissed the 5.5. percent figure as a ``statistical quirk'' which resulted, of all things, from a decline in the price of imported oil. Were the price deflator set at 3 percent, the US economy is shown essentially flat for January through March.
In some sectors today, economic stress is severe. But, overall, the economic slump has been mild - and, hence, so have its political consequences.