Is the US economy is a recession?
What exactly is a recession? I always thought it was two quarters where the GDP declined, but googling it seems this defintion isn’t universal.
A cite would have been nice to go with that, Brutus . Here’s one free of charge:
U.S. economic growth sizzles
The two successive quarter rule is a useful one, but not always conclusive. You could have three successive quarters in which the growth rates were -5%, +0.1%, -5%. That would probably count as a recession, even though it didn’t satisfy the teo successive quarter rule.
The National Bureau of Economic Research definition:
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 is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.
<snip>
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 for 2001, the 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.” Second, we use a broader array of indicators than just real GDP. 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, 2002, the Bureau of Economic Analysis released revised figures for gross domestic product that showed three quarters of negative growth in 2001-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 November 2001, the committee determined the date of the peak in activity in March 2001 using its normal indicators. The two-quarter-decline rule of thumb would not have allowed the declaration of the recession until August 2002, let alone a declaration that it had begun early in 2001, as in the statement that the committee made in November 2001. 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 2001.
Brutus
January 12, 2004, 9:18am
6
The revised figures for Q3 03 put GDP growth at 8.2%. Not shabby.
Following 9/11, we did have 3 successive quarters of negative growth, and hence, a recession. (The bea.gov website will let you examine the GDP figures from 1929 on, but because the website uses dark magic, I don’t believe I can link to a table there.)
But is America in a recession now? No. Not even close.
NBER gives the dates of all of the recessions back to 1854.