What the media is calling "market meltdowns around the globe" this week are signaling the "R" word to many. But during a presentation at Heavy Duty Aftermarket Week in Las Vegas Tuesday, one economist said not so fast.

"What the stock market thinks doesn't indicate whether or not we're in a recession," said Robert Dieli, president of RDLB Inc., an economic consulting firm that works with clients in the trucking industry, during the Heavy Duty Aftermarket Forum presented by MacKay and Co.
Dieli showed a graph of the Standard & Poor 500 stock index percent change from year-ago figures. Thirteen times since 1955, he said, that line has dipped below zero. There have been recessions seven of those times and no recession six times. "That's pretty close to a coin toss," Dieli said.
He also said there is a misconception about the definition of a recession. The official definition, he said, comes from the national bureau of economic research, a private, nonprofit, nonpartisan research organization. Its definition says, "a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales."
This is more complex than the widely accepted definition that a recession is when you have two consecutive quarters of negative GDP growth, but is more accurate, Dieli said.
A more accurate indicator of whether or not we're in a recession, he said, is non-farm payroll employment, which comes out once a month from the U.S. Bureau of Labor Statistics. According to that data, he said, we are clearly not in a recession - yet. When you look at a graph showing the non-farm payroll change from prior months, he said, when that number goes down through 1 percent, recessions start to appear. "Last month it was 1 percent. That may be revised upward, but there is reason to be concerned."
Dieli has developed a method of predicting recessions he has dubbed the Aggregate Spread. This uses four variables that he says have strong business cycle characteristics: 20-year Treasury yield, the Fed funds rate, the inflation rate and the unemployment rate. This, he says, can predict a recession nine months in advance and has accurately done so since 1967.
"Every time it's gone negative, there's been a recession," he said. So far this time, he says, it has not gone negative.
However, the forecast indicator is pointing to slower GDP growth and slower freight growth in 2008, he said. "While the risk of a recession has increased, both the Fed and the Bush Administration are taking steps to avoid a sustained downturn," he said, in reference to the Fed's ¾-percent rate cut Tuesday and the Bush Administration and Congress' efforts to quickly pass an economic stimulus package. "While the Aggregate Spread is still positive and trending sideways, that makes me think there is a reasonable chance we can avoid recession."