Us recession dating
Poterba: Well, if it’s looking for a recession, then it’s looking for evidence of a significant and sustained downturn in economic activity that is broadly distributed across the economy.
It’s not looking for just a blip, it’s looking for something that’s more substantial, and it uses a number of different measures to try to gauge what’s happening. It’s not that whole two cycles of negative GDP growth, two quarters, right? And the reason we do not do that is because you could easily imagine a situation in which real GDP declines by one-tenth of a percent in one quarter, or one-tenth of a percent in another quarter, while at the same time employment is rising, real gross domestic income is rising. And what the committee, while it admittedly is a group of 10 people, and it’s looking at a number of different measures, it’s making ultimately a subjective call.
Many economists are searching for signs of the next recession. James Poterba, president of NBER, sat down the Marketplace host Kai Ryssdal to talk about what he looks for when it comes to tracking a recession.
Chief among them are the economists at the National Bureau of Economic Research, a group that studies the trends and turning points of the U. The following an edited transcript of their conversation. The two founders, one of them was a Marxist labor organizer and the other was a corporate titan who worked for AT&T.
The last time the American unemployment rate rose above 10%, during the recession of 1981-82, the economy added between 1m and 2.5m jobs in the first nine months of recovery.
Meanwhile, housing markets look shaky just as government schemes to support the sector are ending.
The choice to delay a conclusive statement may have been an act of caution, to avoid a black eye in the event that the economy contracts again before reaching its previous peak. Recent data indicate that recovery in manufacturing is well established, and service-industry expansion has picked up pace in each of the past three months.
But the suggestion that the economic pain is not yet definitively over struck a discordant note amid cheerier headlines. Labour markets are finally improving; during the first quarter of this year employment grew by 162,000 or 1.4m, depending on which data set you use. The Dow Jones Industrial Average has risen by over 10% since early February, and recently closed above 11,000 for the first time since September 2008. By Mr Gordon's calculations, much of the data point to June 2009 as the likely recession end-date.
But it does not mean that when we’re out of a recession, economic activity is at the level we would like to be.Very short periods of decline are not considered recessions.Most commentators and analysts use, as a practical definition of recession, two consecutive quarters of decline in a country’s real (inflation-adjusted) gross domestic product (GDP)—the value of all goods and services a country produces.It’s trying to use judgment to impose on the data rather than going with a very simple rule in these cases. I mean, just for the Great Recession, which started in December of 2007, the Business Cycle Dating Committee didn’t figure that out until the summer 2008? It was the Monday after Thanksgiving when we announced that the U. economy had entered a recession in December of the previous year.We got some, I wouldn’t call it fan mail, but some rather harsh commentary from the public for announcing that we were in a recession at that point. The point to make here though is that by June of 2009 we were out, so it was long, and it was deep.