The 'Non-Recession' Has America in Denial: No one wants to mention the R word, despite ample evidence that the economy is getting weaker.(Judgment Calls)(Business)(Brief Article)

Back in the late 1970s, Cornell University economist Alfred Kahn briefly oversaw the Carter administration's voluntary wage-price guidelines. Kahn was (and is) a jovial soul whose power and influence suffered from his stubborn candor and sense of humor. He once irked the White House by suggesting that rampaging inflation might lead to a recession or a "deep, deep depression"--an assessment that Carter's aides promptly disavowed. Kahn retreated and promised that, in the future, he would refer to a recession as a "banana." He later shifted to kumquat after a big banana company complained.

We are, it seems, now in a comparable situation. No one wants to utter the R word, because it signifies a symbolic threshold that, if crossed, might worsen consumer, business and investor psychology. The silence is rationalized by the popular convention of defining a banana as two consecutive quarters of declining economic output, or gross domestic product (GDP). This hasn't happened yet, unless the GDP statistics are revised downward--which is possible.

But most other business indicators suggest that the economy is already in a banana, or soon will be. Consider:

Industrial production has declined for 10 consecutive months and is now 4.2 percent below its high in September (source: the Federal Reserve).

Employment reached a peak in early 2001 and has dropped by 259,000 jobs according to a survey of businesses and 620,000 by a survey of households (source: the Labor Department).

Newspaper help-wanted ads have been falling since February 2000 and are down 36 percent (source: the Conference Board, a research group).

Airline traffic has dropped every month since February compared with the same month in 2000 and is down 1.2 percent for the year. Air cargo has fallen 8.7 percent (source: the Air Transport Association).