My Recession Signal

Way back in April of 2009 I posted a piece about the economic conditions at that time and how I came up with my own signal. I wanted to revisit that signal and see if it is giving any indications of the current time. Here below you can see the same image I took at that time.

April 2009

As we can see, the cold container was packed with all sorts of items. I revisited our signal in September 2009. You can see that from the image below.

September 2009

As you can see things appeared to have improved but not by much. So I decided that it was too preposterous to call an end of recession at that time.So three-four months later I took the picture again. Here is the image of the same refrigerator.

January 2010
Voila!! Santa Claus must have rained in a lot of gifts during 2009 holiday season time. Looks like people are spending more outside on food. So here it is, our recession indicator is showing that the Recession is over.

But as anyone can tell, this is not an exact science. It only indicates the situation at my work place, because the uncertainty that we(my colleagues and myself at work) went through in mid 2009(there were some layoffs and re-org) is over and people at my work place are more comfortable. We are seeing more relaxed spending habits when it comes to eating lunch. There is no way I can say the same situation exists across the city, leave alone across the country. Also I did not record the time when I took the pictures. It is important because, the image can tell a different story based on when it was taken, like post-lunch and pre-lunch. Pre-lunch can tell we are in recession and post-lunch can tell we are out of recession and all this signal switch in just one day and few hours.

So far I have based my views on visual observations. For an index to have any meaningful value, these observations have to be quantified. Quantification of this signal to make up an index opens a slew of problems. Like what and how do you quantify? Do you take the number of items? This has many problems like one day the items can mostly be beverages and the number of items will be lot more than a day when lunch bags are more. Should we consider the volume occupied? It poses a very huge problem of measuring the volume of items occupied. The best measure is to find how many people are bringing their lunch to work from home. But this involves conducting a survey of the people working. On and on we can go with the shortcomings!

If the above mentioned trivial shortcomings of making the index a scientific quantifiable value are cleared, this signal does have some wings. Just like Case-Shiller Home Price Index became popular during the recent/current recession, similarly my own index based on my recessional signal will become popular. I will get to be on TV and write books about it. hmmm....