You don't usually read about this in the papers because headline official statistics are adjusted to remove seasonal variations. Such seasonal adjustment, however, removes important realities. If we seasonally adjust the weather, a heatwave is as likely in December as in July. But I doubt that many of you are reading this while sunbathing in your garden.
This poses the question: if we take seasonal recessions for granted, why are non-seasonal recessions seen by many as frightening? After all, both mean that incomes are lower.
A big reason for the difference is that a non-seasonal recession creates uncertainty whereas a seasonal recession doesn't so much. Retailers who know that demand will fall in January can plan their inventories accordingly. And seasonal workers who know their job will end at Christmas can arrange their lives around that.
Non-seasonal recessions, by contrast, are associated with nasty surprises.
Not least of these is the discovery that businesses we previously thought to be highly productive are not. For example, the 2000 downturn was accompanied (and caused) by us learning that tech companies wouldn't deliver the profits we hoped. And the 2008 recession was caused by us learning that banks could no longer supply as much credit as we'd expected.
In both cases, what we suffered was not merely a loss of income, but a permanent loss of wealth. That's something very different - and much nastier - than a seasonal recession. Yes, recessions can sometimes have 'cleansing' effects; they can increase subsequent growth by allowing efficient companies to acquire assets cheaply. But they can also have the opposite effect, of permanently reducing subsequent growth. The 2008 recession fell into the latter category.
Such long-term losses of productive potential have two nasty effects which seasonal recessions do not have.
One is that people who have borrowed in anticipation of good times find that recessions cause them to have too much debt. This can prolong the recession because attempts to cut debt are collectively self-defeating: if I cut my spending to pay off my debts, companies that previously enjoyed my custom suffer a loss of income and so are less able to clear their debts. Central bankers have tried to mitigate this problem by keeping interest rates low. But that didn't wholly protect us from the damage done by governments' attempts to reduce their borrowing.
A second effect is cultural and political. Back in 2006 Harvard University's Ben Friedman pointed out that stagnation and recessions tend to make people less supportive of democracy and open societies. Subsequent events have proven him right. Given that political uncertainty is often bad for equities, this should worry even the most narrow-minded of investors.
There are, therefore, big differences between seasonal and non-seasonal recessions. This does not, however, mean we should relax about the coming seasonal fall in GDP. Yi Wen, an economist at the St Louis Fed, has estimated that seasonal recessions are an important cause of business cycle recessions: business lost at the start of the year doesn't always return. So yes, perhaps seasonal recessions do matter after all.
