A recession is technically two consecutive quarters of negative GDP. Below is a graph of U.S. real GDP. The only double dip recession in recent times has been between the 1980 and 1983 time period.
Below is GDP vs. the official U.S. unemployment rate:
Notice the unemployment rate peak lags negative GDP. Also notice when the unemployment rate surges, slope moves dramatically higher, it's almost a critical mass, pushing GDP lower? While unemployment is officially a lagging indicator, it also does affect overall current GDP for people who are broke do not consume. Personal Consumption is about 68% of U.S. GDP. People who have no jobs cannot buy things as way too many Americans know right now. People who have no jobs reduce demand for goods and services.
The group responsible for business cycle dating is the NBER. Their criteria for identifying a double dip recession is not just the technical two quarters of negative GDP growth.
The committee's procedure for identifying turning points differs from the two-quarter rule in a number of ways. First, we do not identify economic activity solely with real GDP, but use a range of indicators. Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology. Third, we consider the depth of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in activity. Fourth, in examining the behavior of domestic production, we consider not only the conventional product-side GDP estimates, but also the conceptually equivalent income-side GDI estimates. The differences between these two sets of estimates were particularly evident in 2007 and 2008.
So, in other words, the NBER does not have to have two consecutive quarters of negative GDP in order to declare a double dip recession or a prolonged recession. The definition of a depression is a recession lasting more than 24 months or one quarter of negative GDP > 10%. The NBER does not define depressions and for comparison's sake, the time period from 1929 to 1933 saw real GDP decline 27%.
While forecast estimates for Q2 2010 GDP vary, many are being downgraded below 3%. On this site we calculate a 2.2% Q2 2010 GDP from the ISM report and a 2.48% estimate from Personal Income statistics. While these estimates are very rough and an entire month of raw economic statistics is missing, the reality is one needs about 3% quarterly GDP growth just to maintain the status quo. Even more frightening, there appears to be something structurally wrong with this general rule of thumb or ratio of GDP to employment.
Take a look at this now infamous graph by Calculated Risk. It shows the depth of job loss in comparison to other recessions.
That leads to the question, is a double dip recession probable? Well, by two consecutive quarters of negative GDP, it appears not. The unemployment rate, while a lagging indicator, does affect GDP, especially consumption (PCE).
Is a double dip recession probable by the fact we need over 3% quarterly GDP growth as well as over 100,000 jobs created each month just to maintain, just to keep up with population growth? In a word, yes.
Notice Q1 2010 GDP was below 3.0%. Additionally, 68% of that growth was inventory rate changes.