NBER BUSINESS CYCLE DATING COMMITTEE SAYS ITS TOO SOON TO SAY ON THE US RECESSION

The problem is that the committe has to try and be sure the recovery is real, and that there is going to be no double-dip, before giving the green light signal. The situation is complicated by the confusing and conflicting signals which are arriving, especially on the employment front, there seems to be a constant 'two steps forward, one step back, one step forward, two steps back' process going on. In the end, as the saying goes, every recession, and every expansion is unique, and it is the absence of mere repetition of the same that makes the calls so damned tricky.

The U.S. economy continues to experience increases in production and income with no significant growth in employment. According to recently revised data, real personal income has generally been growing over the past year. Employment grew slightly from May through August 2002, but declined in September. These and other signs indicate that the decline in activity that began last year may have come to an end. The NBER's Business Cycle Dating Committee will determine the date of a trough in activity when it concludes that a hypothetical subsequent downturn would be a separate recession, not a continuation of the past one. The trough date will mark the end of the recession. The committee will not issue any judgment about whether the economy has reached a trough until it makes its formal decision on this point. The committee waits for many months after an apparent trough to make its decision, because of data revisions and the possibility that the contraction would resume. For example, the committee waited until December 1992 to announce that a trough had occurred in March 1991.

In November 2001, the committee determined that a peak in business activity occurred in the U.S. economy in March 2001. A peak marks the end of an expansion and the beginning of a recession. The determination of a peak date in March is thus a determination that the expansion that began in March 1991 ended in March 2001 and a recession began in March. The expansion lasted exactly 10 years, the longest in the NBER's chronology.

Because a recession influences the economy broadly and is not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The traditional role of the committee is to maintain a monthly chronology, so the committee refers almost exclusively to monthly indicators. The committee gives relatively little weight to real GDP because it is only measured quarterly.

In 2002, indicators measuring output and income generally have been rising, while employment has been essentially constant. The primary factor accounting for the more favorable performance of income and production relative to employment is the continuation of rapid productivity growth resulting in corresponding growth in real wages.

According to data released in September (http://www.bea.doc.gov/bea/newsrel/gdpnews release.htm), real GDP increased at an annual rate of 1.3 percent in the second quarter of 2002, and 5.0 percent in the first quarter. GDP reached a peak in the fourth quarter of 2000, contracted for the first three quarters of 2001, and has expanded since then to a point above its level in the second quarter of 2001. This performance of real GDP is consistent with the other data considered by the committee. Output fell less than employment during the recession and currently is rising faster than employment because of unusual productivity growth.
Source: NBER
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