ANOTHER BAD PAYROLL

jobs report. Eighty thousand jobs lost in March, following on top of downwardly revised 76,000 losses in both of the two months before. Surely now I should admit that we're in a recession, and that we've been in one all year.

Sorry, but no. Think I'm being unrealistic? It's you who are being unrealistic if you think we're in a recession. In fact, if you think this is a recession, then you've never really lived through a recession.

Eighty thousand jobs lost? Give me a break, you wimp. That's nothing! If this is a recession, then it started in December when the numbers all started to slump and so we're three months into it. Historically, when we're three months into a recession, we're losing 250,000 jobs every month.

Worried about new jobless claims? Thursday's report showed 406,000 of them. Sorry, I'm not impressed. Historically, when we're three months into a recession, we're seeing 550,000 new claims.

The same thing is true for just about every economic statistic you can point to, other than the mess in the housing sector. The stock market? On a total return basis, the S&P 500 is only down 11.6% since its all-time highs last October. That, too, is nothing. Nothing!

Are we in a slowdown? To be sure. But not a recession.

But if you think we're in a recession, you may be wrong, but you are not alone. The majority of professional economists agree with you, according to surveys.

Whenever I meet with my clients, or with other institutional investors, I always start the meeting by saying, "Raise your hand if you think we're in a recession." At a meeting with 25 institutional investors on Wednesday I got 23 raised hands.

But then I asked the question again, another way. I said, "Wait a second. If things get worse in jobs, incomes, GDP, industrial production and so on, then we'll know we've been in recession since December. But what if they don't? What if they stay just like they are right now, no better and no worse? Do you still think we're in a recession?"

Not one person raised his hand. Do you see what that means?

It means that while everyone seems to think with certainty that we're in a recession right here, right now, what they really mean is that they think things are going to get worse from here and when they do, we'll have a recession. But we don't have one now. Not yet.

This recession is just another prediction. Just another economists' forecast. A guess. A whim. Until it really happens, it's just another ghost story to scare the kiddies with.

I don't think things are going to get much worse, because I think we've definitively arrested the worst of the credit crisis that caused the slowdown we're in to begin with. We've turned the corner on that one. But there are lags involved, so the slowdown in the general economy may persist for another couple months, and the statistics may get slightly worse before they get better.

But so what? So what if the National Bureau of Economic Analysis the nabobs who "officially" decide when the economy's business cycle peaks and troughs declare that this slowdown really is a recession?

I'm not scared of that. It's just words, not reality. The last time the gurus at the NBER declared an "official " recession was in November 2001, when they said one had begun in March of that year.

But guess what? The next July they declared that the recession they'd just declared in November 2001, ended in November 2001! In other words, they recognized the recession at the exact moment it was already over.

They did even worse in the previous business cycle. Then they declared in April 1991, that a recession had begun in July 1990. But then in December 1992, they declared that recession had ended in March 1991 that is, it ended a month before they had announced it in the first place!

So stop worrying about the r-word. We're not in a recession, and we're not going into one. And if some group of propeller-heads says we are, it will be too late to matter. The reality is that last month the markets began a repair process that is destined to end this slowdown before it turns into anything really bad.

As I discussed here two weeks ago, the failure of Bear Stearns and the quick, decisive action by the Federal Reserve to protect the market from its fallout, was a real turning point. The reasons why are worth repeating.

The lesson of Bear Stearns is that the very worst thing that could possibly happen to markets happened and we survived. Admittedly, it was a terrible blow for a venerable investment bank to vaporize in a matter of hours. But the important thing is that none of the terrible consequences of that event actually materialized.

Bear was the nexus of trillions of dollars in counterparty contracts with institutions all over the world. If Bear's collapse had not been orderly, the failure of those contracts would have rippled throughout world markets. We could have come into Monday, March 17, with all the world's stock exchanges closed for three months while we figured it all out. Then we'd have had a recession. Or worse.

But the collapse was very orderly indeed. All contracts were honored. Nobody got hurt except for Bear Stearns itself. It was like a terrible car crash in which the car itself was totaled, but the passengers were able to walk away. That's because the airbags deployed and saved their lives. The airbags were the Fed.

Now we've been through the worst, and we know we can survive. We know the structure of modern global financial markets is stronger than we feared. We know that institutions are in place to stave off the worst systemic consequences of even cataclysmic events like Bear Stearns. And that makes all the difference.

Because once the worst case is taken off the table, the sum of all fears is far less. And when fear is less, confidence is more. And what this credit crisis has needed all along is just a little confidence.

We're not in a recession now, so real damage to the economy has not occurred. And the crisis of confidence in credit markets has passed so real damage is not likely to occur from here.

It may take another month or two for the consensus to get the message that the worst is behind us. But the present slowdown will shortly end, and things will start to pick up. But don't expect a V-shaped recovery. You can't have the up-leg of the V if you haven't first had the down-leg, and we haven't had that.

So the bottom is in for stocks, and they should gradually recover from here, sneaking up a little bit at a time, with the usual back-and-forth from day to day and week to week until before you know it, you'll wake up some morning and we'll be back at the highs of last October.

Donald Luskin is chief investment officer of Trend Macrolytics, an economics consulting firm serving institutional investors. You may contact him at don@trendmacro.com.