The word recession conjures up dark images and a frightful aura of despair and futility.  It bespeaks financial trouble, unemployment, and hard times ahead.  These are all cultural associations we’ve made with the word recession, but what does it actually mean?

According to Harry Truman, “It’s a recession when your neighbor loses his job; it’s a depression when you lose yours”.  As simple as this definition is, the real definition of a recession is much harder to pin down.

Many economists and members of the media define a recession as two consecutive quarters of declining real gross domestic product (the word real indicates that the number has been adjusted to account for inflation, which can be measured using a number of different scales).  The National Bureau of Economic Research (NBER), however, uses five indicators when diagnosing a recession, and real gross domestic product (Real GDP) is just one of them.  The other four are real income, employment, industrial production, and wholesale-retail sales.

The problem with defining a recession is that nobody can seem to agree on what exactly constitutes one.  Additionally, it’s difficult to tell if the economy is in a recession until after the recession is either well on its way or has concluded because things can change quickly.  Indicators that have been failing can suddenly improve and vice versa.

For example, the most recent recession lasted from March 2001 to November 2001.  That recession contained only one quarter of declining real GDP.  The recession was declared in July 2003, almost 20 months after it had concluded, because the NBER could not declare a recession until the data was in hand.

That being said, it can’t be said definitively that we’re in a recession.  Sure, there are warning signs.  Hiring has slowed dramatically in the last year, incomes and wealth are dropping, and industrial production is declining.  The other two indicators, sales and real GDP, are inconclusive at this time because the data is not yet available.

More and more economists, however, are leaning toward declaring the U.S. to be in a recession.  In October 2007, economists who participated in a survey taken by USA Today on average said that there was a 30% chance of a recession and only 6% said that there was a greater than 50% chance.  In January, nearly one in three put the chances of a recession at 50%.

As alarming as this sounds, many economists are unsure whether we can be expecting a recession in the classic sense.  Though our nation is enduring a period of weak growth, the labor market is still holding steady and that is cause for cautious hope.  As I said in the previous post, there are certain jobs and industries that are still clamoring for more qualified people and that will continue to be the case.

Kristina Cowan writes in her blog for PayScale that jobs in fields that people will continue to make use of regardless of a recession are a relative safe-haven in the recessional job market.  Fields like healthcare, federal government, clean technology, information technology, and sales and marketing are likely to fare well in a recession due to their necessity for the average person.

Though economists put the chances of a recession at 50%, nothing is done yet.  The best plan at this point is to hope for the best but prepare for the worst.  In my next blog post I’ll write about ways that you can lessen the impact of a recession on your career.  Taking these steps ahead of time is a good idea in general but in the case of a recession they could help keep you afloat.

Part One: What Jobs Are Looking Safe Now and In the Future?

Part Three: What Can I Do to Protect My Career?