-WHAT IS A RECESSION?

Sometimes It Is a Thingumajig

THE No. 1 worry of U.S. businessmen is a "recession." But the strange fact is that nobody seems to know exactly what a recession is. The word is as hard to define as love.

One trouble is that such expressions as "depression" and "recession" have become bad words, particularly among politicians, and are never to be used if a nicer word can be found. Thus, a whole new vocabulary has evolved. In the new jargon, a recession can be a "rolling readjustment," a "correction," a "slippage," an "easing," a "mild dip," a "downswing," a "normal adjustment," a "leveling off," a "slight downturn," a "lull," a "return to normalcy" or a "thingumajig." These euphemisms, of course, also defy definition. What, for instance, is a "return to normalcy," when for decades no one has known what economic normalcy is?

There are some brave souls who attempt to define recession in specific terms. The results are just as baffling. To retailers, a recession is a drop in sales, but they will differ as to whether it is a 5% or a 20% drop. To manufacturers, industrial production is the yardstick; to labor leaders, unemployment; to Wall Streeters, stock prices.

A recession, says Harvard's Economist Sumner Slichter, is "no more than a momentary drop in employment and production"--and the U.S. "is in one right now." "Of course we're in a recession," agrees Economist A. W. Zelomek, president of the International Statistical Bureau. But Zelomek's idea of recession may startle many businessmen. "At the bottom," says he, "we'll be way above the prosperity levels of pre-Korea." Staff Chief Grover Ensley of the Joint Committee on the Economic Report has still another view of what is happening. Says he: "We are getting into an adjustment which, if not of the recessionary type, is of the downward type."

Where does recession end and depression begin? New Dealing Economist Robert Nathan defines a depression as a sharp decline that lasts a few years. A decline that lasts only six months to a year and a half could be called a recession. To Nathan, depression means 7,000,000 to 8,000,000 unemployed (v. 1,200,000 today); recession means 4,000,000 to 5,000,000 unemployed for six to 18 months. Another New-Fair Dealer, Economist Leon Keyserling, describes a recession as a "short-run downturn of moderate or even large proportions." The Commerce Department's Under Secretary Walter Williams talks darkly of the time when "soft spots merge and a breakthrough is imminent." Treasury's Deputy Secretary Randolph Burgess is precise. A recession exists, says he, only when gross national product falls at least 5% (which would mean a drop from the current $371 billion to $352 billion).

Recession has been robbed of its meaning because past recessions have borne little similarity to one another. The last three recessions, in 1920-21, 1937-38 and 1949, had quite different characteristics.

The recession of 1920-21 was marked by a precipitous 45% drop in wholesale prices, because of overloaded inventories, and" soaring unemployment (up 752% to 4,800,000 in a year). Stock prices dropped about 18% (the Dow-Jones industrials fell from 90 to 73) and industrial production fell 23%. On the other hand, in 1937-38 wholesale prices fell only 9%, while industrial production and the stock market each fell about 20%. Unemployment rose from 6,400,000 to 9.800,000. By the standards of those earlier years, what happened in 1949 was merely a statistical flutter. Unemployment rose some 60% in a few months to 3,400,000 (not even high enough to meet Nathan's present-day definition of recession). Prices declined only slightly, industrial output dropped a mere 8%, and stock prices, after a quick 10% dip, were higher (200.52) at the end of 1949 than they were at the end of 1948.

Using these same yardsticks, it is hard to prove that the U.S. is in a recession now, although sales are down in some industries. Industrial output of 232 is near the postwar peak of 243, unemployment of 1,200,000 is near its alltime low, stock prices are only 6% below their bull-market peak, and the gross national product is within a shade of its peacetime high.

Actually, a spate of recession predictions has been a recurring phenomenon of the great boom. Time and again, economists have predicted that business would turn downward, usually in "about six months." But as the "six months" stretched into years with no drop, economists became more cautious. They now predict a decline in such indefinite terms that they can't be wrong. Only the future will determine whether the U.S. is now undergoing a "rolling readjustment" or "recession," or merely passing once again through a period of "Whatchamacallit," i.e., a troubled economic period which gives rise to all manner of dire predictions.

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