Recession: Now It’s Official
Kurt Brouwer December 1st, 2008
The National Bureau of Economic Research is the official arbiter that dates the beginning and ending of recessions. Today, the NBER announced that the recession is officially one year old. Happy birthday!
NBER Makes It Official: Recession Started in December 2007 (Real Time Economics, December 1, 2008, Phil Izzo & Sudeep Reddy)
Official recession watchers at the NBER said today that the U.S. is recession, and it began in December 2007. Here is the text of their statement.
The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.
They are saying the economy peaked a year ago and has been trending downward ever since. That’s interesting information because GDP actually went up in the first half of 2008. According to the NBER, we have the unusual occurrence of being in a recession while the economy is growing. Not too long ago that would have been impossible because a recession was defined as two consecutive quarters of economic contraction. Now, NBER has a new, post-modern definition of recession that is considerably more nuanced than the old one.
The new one from the NBER goes like this:
…A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
Over the past 20 years, recessions have been infrequent. In fact, we have only had two, in 1990-91 and in 2001. Both recessions were mild by historical standards and both lasted only 8 months, which is below average for the post-WWII period (see NBER for more).
According to the NBER, this recession has already lasted longer than the two previous recessions. In fact, we have to go back to 1980-82 to find a recession that lasted this long. Back then, we had two recessions in a short period of time, with the first lasting six months and the second lasting 16 months.
For more on this, see The Path to Prosperity in America.
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