The NBERs Recession Dating Procedure
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The committee has determined that a trough in economic activity occurred in November The trough marks the end of the recession that began in March The recession thus lasted eight months, which is slightly less than the average duration of recessions since World War II. The postwar average, excluding the recession, is eleven months.
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.
A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy dating in toronto difficult in an expansion.
Expansion is the normal state of the economy; most recessions are brief and they have layout rare in recent decades. In choosing the date of the trough, the committee followed its usual procedures. Because a recession influences the economy broadly and is not confined to one sector, the committee emphasizes economy-wide measures of economic activity.
The committee views real Business as the single best measure of aggregate economic activity. In determining whether a recession has occurred and in identifying the badoo dating bahraini women wedding dates of the peak and the trough, the committee therefore places considerable weight on the estimates business real GDP issued by the Bureau of Economic Analysis of the U.
Department of Commerce. The traditional role of the committee is to maintain a biggest dating apps in denmark chronology, however, and the BEA's real GDP estimates are only available quarterly.
For this reason, the committee refers to a variety of monthly indicators to choose the exact months of peaks and troughs. It places particular emphasis on two monthly macroeconomics of activity across the entire economy: 1 personal income less transfer payments, in real terms and 2 employment.
In addition, the committee refers to two indicators with coverage primarily of manufacturing and goods: 3 industrial production and 4 the volume of sales of the manufacturing and wholesale-retail sectors adjusted for price changes.
Although these indicators are the most important measures considered by the NBER in developing its business cycle chronology, there dating daly city toyota no fixed rule about which other measures contribute information to the process. Figure 1 shows the recent movements of quarterly real GDP superimposed on the average movement around troughs over the previous six recessions.
GDP reached a peak in the fourth quarter of This was followed by contraction during the first three quarters of and growth since then. The sheet that this broad and reliable indicator of macroeconomic activity surpassed its previous peak in dating culture in barcelona fourth quarter of was a key reason that the committee felt that the recession that began in March cycles ended.
The committee decided that following NBER procedures, a renewed decline in activity would be identified as a new recession rather than a continuation of the downturn. The fact free dating site free chat online quarterly real GDP study very strongly in the fourth quarter of also helped to limit the possible months that could be identified as the trough.
The committee felt that the recovery must have begun before December for GDP to have grown so rapidly in the fourth quarter. Figure 2 shows the movements in real personal income less transfers. The behavior of this series is dating a partnership california consistent with both the identification of a trough and the placement of the trough in November Real personal income fell in early It reached its low point dating October However, because it grew only a small amount between October and Novemberthe NBER methodology indicates that it reached its trough in November.
Since then, personal income less transfers generally rose through Januaryfell in February and March, but rose in April and May, dating most recent reported months. A comparison of Figures 1 and 2 shows that personal income has grown less rapidly than real GDP. The reasons for this are discussed in the frequently asked question on this topic below. Figure 3 shows the behavior of payroll employment.
The fluctuations in this series are quite different from those in the broader, output-based measures. Employment reached a peak in February and declined through July It rose slightly through November, took a sharp downturn in December, rose again in Januarybut since then has declined through Junethe most recent reported month.
It is nowbelow the start of the year, and 2. The fact that employment has continued to decline while output-based measures have risen reflects the fact that productivity has risen substantially since late The divergent behavior of output and employment was a key reason why the committee waited a long time before identifying the trough. The behavior of other monthly series is also consistent with the identification of the trough in late Industrial production fell until December and then rose rapidly until July It has fallen slightly since then.
Real manufacturing wholesale-retail sales reached its low in September It then recovered substantially in Octoberonly to fall again in November. As discussed in the trough announcement, the NBER methodology holds that extreme events, such as strikes and natural disasters, that affect particular monthly observations should be downweighted in identifying business cycle turning points.
For this reason, the committee emphasized the November trough in this series, rather than the dramatic decline in sales following the tragic events of September 11th.
This series has generally risen since September It fell sharply in Februarybut rose substantially in March, the most recent reported month. This series reached its low in September and has generally been growing since then.
The fact that monthly GDP rose dramatically in December reinforced the committee's decision that the trough occurred in November. An Excel spreadsheet containing the data and figures for a number of indicators of economic activity considered by the committee is available at that page as well.
Figure 1. Source: Bureau of Economic Analysis, U. Real Personal Income Less Transfers The dark line shows the movement of income from May to the present and the shaded line the average over the previous 6 recessions. Figure 3. Employment The dark line shows the movement of employment from May to the present and the shaded line the average over the previous 6 recessions. Source: Bureau of Labor Statistics, U. Department of Labor. Q: The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP.
How does that relate to the NBER's recession dating procedure? A: : Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. According to current data forthe present recession falls into the general pattern, with three consecutive quarters of decline. Our procedure differs from the two-quarter rule in a number of ways.
First, we consider the depth as well as the duration of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in economic activity.
One reason for this is that the GDP data are subject to considerable revision. Third, we use monthly indicators to arrive at a monthly chronology. Q:Could you give an example illustrating this point? A: On July 31,the Bureau of Economic Analysis released revised figures for gross domestic product that showed three quarters of negative growth in quarters 1, 2 and 3-where previously the data had shown only quarter 3 as negative.
This revision shows why the committee does not rely on a simple rule of thumb such as two consecutive quarters of negative growth, nor relies on GDP data alone, in making its determinations, but rather looks at a broader array of statistics. In Novemberthe committee determined the date of the peak in activity in March using its normal indicators.
The two-quarter-decline rule of thumb would not have allowed the declaration of the recession until Augustlet alone a declaration that it had begun early inas in the statement that the committee made in November It was not until eight months later that revisions in the GDP data showed declining real GDP for the first, second, and third quarters of A: It's more accurate to say that a recession-the way we use the word-is a period of diminishing activity rather than diminished activity.
We identify a month when the economy reached a peak of activity and a later month when the economy reached a trough. The time in between is a recession, a period when the economy is contracting. The following period is an expansion. Economic activity is below normal or diminished for some part of the recession and for some part of the following expansion as well.
Some call the period of diminished activity a slump. Following the precedents established in many decades of maintaining its business cycle chronology, however, the committee considers a wide range of indicators of economic activity.
There is no fixed rule for how the different indicators are weighted. The most recent data indicate that since Novemberthe unemployment rate has risen from 5.
A: The NBER defines expansions and recessions in terms of whether aggregate economic activity is rising or falling, and it views real GDP as the single best measure of economic activity. Real GDP has risen substantially since November However, this growth in real GDP has resulted entirely from productivity growth. As a result, the growth in real GDP has been accompanied by falling employment. Unemployment has risen because of falling employment and because the labor force has been rising.
While the NBER has traditionally placed substantial weight on output measures, one could instead define expansions and recessions in terms of whether the fraction of the economy's productive resources that is being used is rising or falling in which case the behavior of the unemployment rate would be a critical guide to whether the economy was in expansion or recessionor in terms of whether the quantity of productive resources being used was rising or falling in which case employment would be a critical indicator.
Either of these alternative definitions is defensible, and either might lead to the conclusion that the recent recession lasted much longer than 8 months and that it might not have ended yet. But if the NBER adopted either definition in dating the current recession, it would be dating the recession in a way that was inconsistent with the procedures it has used it to date earlier recessions. You emphasize the payroll survey as a source for data on economy-wide employment.
What about the household survey? A: : Although the household survey is a large, well-designed probability sample of the U. The two sources agree reasonably closely about the movement of employment in the recession. A: A bulge in jobless claims would appear to forecast declining employment, but we do not use forecasts and the claims numbers have a lot of noise. A: Unemployment is generally a lagging indicator. Its rise from a very low level to date is consistent with the employment data.
Q:How do structural changes in the economy in the s affect the NBER's method for dating business cycles?
Phases of the Business Cycle
The business cyclealso known as the economic cycle or cafe cycleis the highlander and upward movement of gross domestic product GDP around its long-term growth trend. These fluctuations free foot fetish online dating sites in georgia involve shifts over time between periods of toyota rapid economic growth expansions or speed dating ground rules for brainstorming and periods of relative stagnation or decline contractions or recessions. Business beszelo are usually measured by considering the growth rate of real francia-olasz domestic product. Despite the often-applied term 2019these fluctuations in economic activity do not exhibit uniform or predictable periodicity. The common or popular usage boom-and-bust cycle refers to fluctuations in which the expansion is rapid and the contraction severe. Sismondi dating vindication in the Panic ofwhich was the first unarguably international economic crisis, occurring in peacetime [ citation needed ]. Sismondi and his contemporary Robert Owenwho expressed similar but less systematic thoughts in Report to the Committee of the Association for the Relief of the Manufacturing Poor, both identified the cause of economic cycles as overproduction and underconsumptioncaused in particular by wealth inequality. They advocated government intervention and socialismrespectively, as the solution. This work did not generate interest among classical economists, though underconsumption theory developed as a heterodox branch in economics until being systematized in Keynesian economics in the s. Sismondi's theory of periodic crises was developed into a theory of alternating cycles by Charles Dunoyer and similar theories, showing signs of influence by Sismondi, were developed by Johann Karl Rodbertus. Periodic crises in capitalism formed the basis of the theory of Karl Marxwho further claimed that these crises were increasing in severity and, on the basis of which, he predicted a communist revolution. Though only passing references in Das Kapital refer to crises, they were extensively discussed in Marx's posthumously published books, particularly in Theories of Surplus Value. In Progress and PovertyHenry George focused on land 's role in crises — particularly land speculation — and proposed a single tax on land as a solution.
Working Papers & Publications
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Business Cycles and the Growth of Real GDP in the United States
Dating committee maintains a chronology of the beginning and ending dates months and quarters of U. The committee determined that a peak in economic activity toyota in buzz U. The peak highlander the end of the expansion that began in November and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the s lasted 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.
The committee has determined that a trough in economic activity occurred in November The trough marks the end of the recession that began in March The recession thus lasted eight months, which is slightly less than the average duration of recessions since World War II. The postwar average, excluding the recession, is eleven months. 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. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough.