Anticlimax: The Recession Did Start a Year Ago
I don’t know how many times I’ve heard over the past six months that a recession is official after two quarters of negative economic growth. It’s not as if times aren’t obviously tough; if the past 9 to 12 months wasn’t a recession I don’t know what it was. At any rate, we’ve all been waiting on the official word. It came today from the National Bureau of Economic Research, the body of economists which the government, academia and the private sector look to for the official call on recessions and expansions in the U.S. economy.
The first thing to understand is that it turns out there are more points of data in determining recessions than just two consecutive quarters of negative growth. Employment numbers, production, consumer confidence, income and other measures all go into the decision.
The group of economists which makes up the NBER looks at all of these things, over time, and when they make the call it’s not as close to the actual beginning in time of the recession as it would be if the decision were only based on growth of the entire economy. If the determination were that simple, than anyone could make it. In the case of the “official call” made today, there was enough data for the NBER to determine our current recession began in December 2007. So, it seems that what makes the recession an official state of economic being is when the beginning can be determined. I bet there’s some folks in Michigan who are looking at their own indicators today and would’ve made the call about ten years ago.
The first portion of the NBER’s report today says explains it well:
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.
A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.
So, a recession is not simply two consecutive quarters of negative growth – it’s many indicators. If you want to read the entire statement released today by the NBER go here.
I thought the recession started 7 years ago! Sure hope W and the gang will have fun clearing brush, while the rest of the world tries to dig itself out.
I bet people already had a hunch about the recession but then sometimes we need somebody to say it out loud in order to get out of denial.
It’s a tough time but there are a lot of good things that the current situation is teaching us. Found a good lens on squidoo about the benefits of economic recession. Check em out..
http://www.squidoo.com/benefits-of-economic-recession