The usual definition of a recession is two quarters of negative change in real Gross Domestic Product (GDP). Actually, the official definition is a lot more complicated than that, and depends on a set of formulas and precedents as measured by an objective monitoring agency. (In the U.S., it is the National Bureau of Economic Research.)

However, that all seems a little academic. There is another question that I would like to address today and in a day or two. How do you know that you are in a recession on a more emotional level? Moreover, hard times can be more localized (geographically and according to certain industries) than a recession on a national stage.

According to the well-known saying, it’s a slowdown if your neighbor loses his or her job. It’s a recession if you lose your job. Over the next couple of days, I’ll present ten “gut check” indicators of recession.

(1) Layoffs at your firm: This is the most immediately apparent indicator. If you are one of the unfortunate ones laid-off, then you certainly know that recession has arrived. If you are one of the survivors (at least for the present), then there are a couple of immediate responses: compassion for your former co-workers and an understandable tendency to keep looking over your shoulder. Limited layoffs can raise productivity in the short term, but there is the danger that too-severe cuts will damage a company’s prospects for years.

(2) Salary and wage increases are held back: If you are one of the survivors, then you are probably grateful to be still receiving an income. Sometimes, when the circumstances are dire enough, workers are asked to take pay cuts.

(3) A real estate downturn: Residential real estate activity grinds to a halt. House prices will stabilize or even decline. The bottom often falls out of the second home/recreational property market in cottage country.

(4) Personal and business travel cutbacks: This is one of the first areas where firms and individuals can save money. “Limited travel directives” from management have become a standard part of generalized cost-cutting by firms needing to slow down expenditures. The airline sector will suffer. Luckily, the Internet and teleconferencing have made it easier to carry on business as usual, even in the absence of face-to-face contact.

(5) Conference attendance declines: Canceling attendance at industry events is another easy decision for cost-conscious companies to make. Only a few firms that specialize in the conference (or trade show) business will survive.

I’ll pick this up again later with a final five symptoms.

Alex Carrick

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