Recession, Depression or Just Plain Bad

A new survey finds six in ten Americans say the nation's in a recession or a depression – and given the events of the past week, that result is no surprise.

With central banks worldwide trying to stave off the financial crisis, and investors trying to find safe havens for their money, a Gallup poll conducted earlier this week found 61 percent said the economy was either in a recession or a depression. That's up from 45 percent in January. The number who said the country is in a depression nearly doubled, from 12 percent to 23 percent. (The survey was conducted Monday and Tuesday, as the financial crisis escalated).

The anxiety out there on the economy is very real. But when most people answer survey questions about whether we're in a recession, they're answering a technical question with a non-technical response. The old rule-of-thumb is that a recession happens when there are two consecutive quarters in which the economy contracts, although the "official" definition from the National Bureau of Economic Research is more complex. The government's numbers show that despite the mortgage problems and rising energy prices, the economy actually grew in the first six months of 2008.

But few Americans are analyzing this the way an economist would. Essentially, a survey question about recessions or depressions pretty much corresponds to the public's perception of whether the economy is "bad" or "really bad." (The CBS/New York Times poll conducted from Sept. 12th through Sept. 16th put the question in those terms and found 39 percent who said "fairly bad" and 39 percent who said "very bad.")

Broadly speaking, personal experience plays a bigger role in public attitudes on the economy than in some other policy areas. In foreign policy, for example, most people are really dependent on the media for their information – very few will have any personal experience of Afghanistan. With the economy, however, people know whether or not their job is secure, whether houses are selling in their town, whether they can afford to fill up their tank with gas. That experience is just as legitimate as any government statistic, and vital for policymakers to understand.

Public attitudes about the economy have been pretty negative all year. In this particular case, however, you've got to remember that this survey was in the field during wall-to-wall news coverage of what happened to Lehman Brothers and Merrill Lynch. So this snapshot of public anxiety may be more media-driven than usual.