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The concept of gross domestic product (GDP) was coined in the 1930s to measure overall domestic economic activity.

It measures the value of final goods and services purchased by consumers.

It generally includes three components: consumption, investment and government spending.

Recently, the government reported a decline in real (inflation-adjusted) GDP for the second consecutive quarter.

What should we take from this news?

The US economy usually grows.

That growth is our rising standard of living. GDP measures our standard of living and its growth – and that’s why you need to think about it.

In my lifetime so far (1947 to 2022), real GDP has quadrupled – from $14,000 to $58,000.

But GDP does not automatically increase every quarter.

We live in a very complex economy with many factors influencing activity. From time to time, economic activity will actually decrease.

These failures can last for a period of time and are called recessions.

The National Bureau of Economic Research (NBER) is charged with, among other things, tracking US economic activity and determining when the economy is expanding or contracting (recession).

It is using a lot of economic measures.

The NBER has experienced 12 recessions between 1948 and 2020.

Unfortunately for decision makers and policy makers, the NBER only makes its decisions after the fact.

Wouldn’t it be useful to have an indicator of that situation available to us in real time? We can use it to make better decisions.

Well, GDP rides to the rescue.

I compared the NBER’s list of recessions to real GDP declines since 1948. Real GDP declined in 11 of the 12 recessions of the period. It has declined in two or more consecutive quarters nine times, twice in one quarter, and one recession – never.

Furthermore, there has been no decline in real GDP since 1948 without a recession. A decline in real GDP is an excellent indicator of a real-time recession.

Unfortunately, the mainstream media denies the obvious. Take the front-page Associated Press article in the Altoona Glass on July 28 – in which it’s only the second consecutive quarter of real domestic product declines. “Increasing Fear” Economic collapse.

Number: The two consecutive quarterly real GDP declines have clearly signaled a recession.

But for the AP and other mainstream media outlets, that news is politically inconvenient.

So our Ministries of Truth ignore the statistical evidence! Instead, they note that rising unemployment (which currently does not exist) often leads to recession – which is true.

But employment still hasn’t recovered to pre-pandemic levels, as many people have simply left the workforce. We have a labor shortage, hence low unemployment.

This is not a sign of economic health, but the opposite. And it does nothing to disprove the historical record that real GDP understates recessions.

Christopher Gable lives in Altoona.