Gas Crunch Already Causing Disturbances

Everyone, and I mean EVERYONE, is being affected by the ever skyrocketing price of oil. Obviously, this isn't news; but what IS new is the sudden dip in miles driven this past March.

According to data just released by the Federal Highway Administration (FHWA), 11 BILLION less miles were traveled on highway systems in March 2008 than in March 2007. Just take a glance at the chart above. This is a dip of 4.3% and amounts to 9 million metric tons of greenhouse emissions that were not released into the atmosphere.

This dip in miles traveled correlates with the price of gasoline beginning it's upward ascent above $3.40/gal, reaching an all time high.

This is an impressive statistic, showing that if we really want to modify the behavior of large groups of people you have to strike at their wallets. No amount of education, advertisement, Inconvenient Truths, or guilty consciences could produce this impact. Interesting.... very interesting.

Recession?

It's no news that economists, analysts, and news media have been trumpeting the ebbing American economy for months now. With the ever-crumbling mortgage market and skyrocketing oil prices putting a hurt on wallets, it only seems logical that many are labeling American economic woes a RECESSION.

But are we really in a widespread recession? This Times reporter says no (at least not yet).

The crux of his argument rests upon the definition of recession. According to the National Bureau of Economic Research, "a recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income and wholesale-retail trade."

So how does this apply to the American economy? Employment numbers are indeed falling, but not quite as much as predicted. According to Bloomberg:

Payrolls shrank by 75,000 workers after decreasing by 80,000 in March, according to the median estimate of 82 economists surveyed by Bloomberg News before the Labor Department's report. The jobless rate rose to a three-year high of 5.2 percent, the survey also showed.

While this is troubling, it isn't quite the catastrophe that many were predicting in December.

According to the Times article, what is protecting the American economy from spiraling down the toilet is the fact that most of our troubles are isolated in the housing/mortgage and energy sectors. The strict definition of a recession would require all facets of the economy to be affected and this simply isn't the case (again, not yet).

And the author of the article does not predict a recession either. In short this is due to three reasons:

1. Based on past evidence (Latin American defaults in '84, the market crash of '87, and the devaluation of Mexican and Russian dollars in '95), severe financial crises do not necessarily indicate a recession is eminent.
   
2. The $600-2000 stimulus checks coming to each American household will provide a much-needed kick in the ass for consumer markets.
   
3. Falling house prices and rock bottom interest rates will reinvigorate the stagnant housing market that will help pull itself out of its funk.
   

Will these predictions come to pass? Who knows. But I like this bit of optimism in an otherwise bleak outlook on American economic futures.