The last recession, dubbed The Great Recession, feels like it is only recently behind us, yet we are apparently already going towards a new one. According to Steven Scott Bayesian, it is very important that people learn to understand the links between statistics and economics in order to survive the next and inevitable recession.Economic indicators and recession statistics are quite complicated and intimidating. However, getting to know them means you can have an increased understanding of economic predictions as well.
Steven Scott Bayesian on Statistics
Statistics are incredibly useful but also have significant limitations. Indeed, they are often manipulated to confirm or deny of certain message. Statisticians often talk about statistical significance and standard deviations, which are essentially technical terms to explain why nothing does what the statistics say. The reality is that a statistic gives a medium point, which means half of everything is below that medium point and the other half is above it. Hence, statistics are not scientifically accurate, they are a median guideline.
The Four Key Indicators
There are four key indicators that must be looked at in order to identify whether or not another recession is imminent. These indicators comma in this country, or gathered by the National Bureau of Economic Research, then compare it to the data obtained from the previous seven recessions. The four key indicators are:
- Personal income, including actual expenditure and disposable income. When these are low and remain low after a significant drop, this is usually indicative of inflation, underemployment, and unemployment period at the same time, it means consumers are changing their spending habits. Both could be indicative of a looming recession.
- Industrial production levels. When fewer things are produced with an industry, it means that people are spending less, but it also means that people will start to lose their jobs, particularly in the manufacturing industry. Historically, this is how the snowball effect leading to recession.
- Unemployment levels. Naturally, the higher levels of unemployment the more likely it is that there is a recession. With every recession, unemployment levels suddenly rise, which has a snowball effect. Thankfully, at present, unemployment levels are still reasonably low, which could mean that there is simply a minor economic downturn rather than a full-blown recession.
- the gross domestic product or GDP. This helps to identify whether there is a downturn, a recession, or a depression. If there is a significant drop that remains lower than 10%, then it is a recession. If it goes above 10%, then there is a depression. If the drop is not statistically significant, then there is simply a short-term economic downturn.
It is very important that people take the time to educate themselves on the statistics surrounding economic recession. This ensures that they can be prepared for any upcoming downturn, regardless of how bad it is. In so doing, they may actually become instrumental in avoiding a full depression. If nothing else, they may at least be able to ride the next recession out.