Two interesting things happened last November 24. One was pretty well publicized, the other not so much:

  1. We got a downward revision of U.S. GDP for the third quarter, from an “advance” 3.5% to 2.8% (it was ultimately determined to be 2.2%) — in any event, it was the first positive print we’d seen in some time.
  2. The National Bureau of Economic Research’s Business Cycle Dating Committee (BCDC) — the folks who date recessions — posted, with no fanfare whatsoever, a very interesting (and undated) statement at their website (the NBER provided me with the date upon a quick inquiry).

As I read the second paragraph of their brief statement, I’m left wondering if the NBER is angling for the (very real, IMO) possibility of a double-dip — which in this case they might well consider one long recession, notwithstanding a “short period of expansion.” Read for yourself (emphasis mine):

In both recessions and expansions, brief reversals in economic activity may occur—a recession may include a short period of expansion followed by further decline; an expansion may include a short period of contraction followed by further growth. The Committee applies its judgment based on the above definitions of recessions and expansions and has no fixed rule to determine whether a contraction is only a short interruption of an expansion, or an expansion is only a short interruption of a contraction. The most recent example of such a judgment that was less than obvious was in 1980-1982, when the Committee determined that the contraction that began in 1981 was not a continuation of the one that began in 1980, but rather a separate full recession.

The note concludes:

The Committee does not have a fixed definition of economic activity. It examines and compares the behavior of various measures of broad activity: real GDP measured on the product and income sides, economy-wide employment, and real income. The Committee also may consider indicators that do not cover the entire economy, such as real sales and the Federal Reserve’s index of industrial production (IP). The Committee’s use of these indicators in conjunction with the broad measures recognizes the issue of double-counting of sectors included in both those indicators and the broad measures. Still, a well-defined peak or trough in real sales or IP might help to determine the overall peak or trough dates, particularly if the economy-wide indicators are in conflict or do not have well-defined peaks or troughs.

Now, when I look at the St. Louis Fed’s “Tracking the Recession” page, I don’t see much that seems particularly “well-defined,” except for Industrial Production (IP). And many other indicators — first, second and third tier — are clearly “in conflict.” At the St. Louis Fed’s page, other than IP, I see three flatlines for Employment, Real Retail Sales and Real Income.

I’d note that the NBER does not care where growth comes from. Several weeks before their November statement, I queried some members of the BCDC as to how they would view stimulus-induced growth. This is how one replied (speaking only for himself, and including the classic economist’s “on the one hand, on the other”):

On the one hand, we feel no need to strip out the effect of government spending to see what the private sector is doing. G is just as much a part of GDP as C+I+X-M.

On the other hand, there is always the danger that the economy might dip back down again in 2010 when the fiscal stimulus fades out, in which case that would probably count as part of the same recession as 2007-09. So in that sense, yes, the expansion has to “take root” organically.

I’d also note this comment from BCDC member professor Martin Feldstein on December 17, 2009:

“The recession isn’t over,” Martin Feldstein, former president of the Cambridge, Massachusetts-based NBER and a member of its Business Cycle Dating Committee, said in an interview with Bloomberg Radio today. “2010 is going to be a very weak year,” Feldstein also said, as American consumers limit spending and home prices may resume their slide.

I’m on record as saying the BCDC will take its sweet time with this one, and their November 2009 statement, in addition to Feldstein’s, gives me no reason to change that point of view. Their announcement — or lack thereof — will likely be a factor in the November mid-term elections (one wonders if there were any political considerations associated with their post-election, December 2008 announcement of a recession having begun one year prior).

Category: Cycles, Data Analysis, Economy, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

36 Responses to “NBER Intrigue”

  1. taylorhr says:

    The stock market may double dip, but the economy has not come out of its recession. I don’t know why so many people confuse the two.

  2. cognos says:

    But Q4 will be 5%… and stimulus will not “fade” until late 2010. It has a long tail. So I think you’re main concerns are misplaced.

    How do leading indicators work?

  3. cognos says:

    Er, … How do leading indicators look?

  4. rktbrkr says:

    BB and O’B have been spraying ether into the carburetor trying to restart the economy but it really hasn’t kicked over yet. Jobs are still dormant and the housing market is less than dormant – and both need to get healthy – at least a little to end the recession.

  5. Has anyone seen the new jobs numbers today? Ruh roh!!!

    Was that Goldman Sachs forecast? And how do we know they haven’t been against their own forecast?

  6. says:

    Good read! With all the Enron data I think we are already in the second dip, the gateway into the depression. Maybe they don’t want to look like fools – again.

  7. cognos says:

    “Employment” is a massively lagged indicator. If you look at the last recovery… the first time you could call a material downtrend in the unemployment rate was Dec, 2004. But the recession ended in winter 03/04 (12 months earlier).

    Why not focus on leading indicators? ISM. Curve. Market. New orders. Credit spreads. Etc. Your life will get easier and your trading more profitable. Just as your driving gets easier when you look forward.

  8. DeDude says:

    With the GOPsters ready, willing and now able, to block any additional stimulus, it is almost certain that we will get another dip. The great recession will be an echo of the great depression. Ben or no Ben, they will manage to repeat the exact same mistakes from 80 years ago. For fear of inflation the idiots will wack us into a wall of deflation. Look up China, we are coming down ;-)

  9. wally says:

    Volker also said the recession is not over (on his recent European trip). I don’t think there is any honest way to track it except to subtract out the stimulus. Stimulus is a carry-forward of future taxes, hence is not ‘growth’.

    I also think you have to go back to years like 2006 and 2007 and subtract the amount of ‘growth’ that was debt that later defaulted.

  10. Invictus says:


    Here’s how explains the Leading Indicators:

    “The leading indicator index does not provide much information on where the economy is headed. It is composed of 7 key economic variables that are known prior to the release and 3 estimated components. Therefore, the only differences between the actual indicator and the consensus is due to the estimation techiniques for money supply, new orders of nondefense captial goods, and new orders for consumer goods. Usually the differences between the leading indicator estimates and consensus estimates for these variables are minor and do not effect the overall index.”

    In a nutshell, Leading Indicators should be — emphasize “should” — be fairly predictable, as most of the components are known in advance. So, in effect, notwithstanding its name, the Leading Indicators aren’t truly “leading.”

    And while we know employment lags, we’re arguably in the 3rd quarter of recovery, right? When do things — outside the stock market — get better?


  11. cognos says:

    Edit that… my dates are off by 1-yr each. Unemployment was clear material downtrend in Dec 03, … recession was over in winter 02/03. Same basic point… lagged by 1-yr.

    You’ll see the same thing this time… unemployment rate in material downtrend by YE2010.

  12. cognos says:

    Invictus… all that says is the “leading indictor” release we got TODAY is known in advance (like yesterday, last week).

    That does not say anything about whether LEADING indicators are helpful in terms of understanding where the economy is headed or not. They are.

    The best macro research shop (ISI) in the world constantly laughs and even wrote a piece this fall called “The Street’s Fascination with Lagging Indicators”. They called the turn very well in Mar/Apr and called housing brilliantly in 00-08 cycle. The basics are often so obvious, its funny.

    What do “lagging” indicators, indicate?

  13. ashpelham2 says:

    What I’m sort of waiting to see is how low unemployment actually does go once we have more than a couple quarters of organic growth. I would suggest that we are going to have a permanently smaller economy, albeit possibly healthier, once government cuts off the flow of funds.

    In my business, when I consult someone nearing retirement without enough saved to retire on, we suggest that they consider working longer if possible. In the back of my mind I am thinking “what if they don’t have a choice but to drop out of the workforce?”

  14. ironman says:

    Invictus wrote:

    As I read the second paragraph of their brief statement, I’m left wondering if the NBER is angling for the (very real, IMO) possibility of a double-dip — which in this case they might well consider one long recession, notwithstanding a “short period of expansion.”

    The NBER may be looking at this data, which would be consistent with the economic situation of the private sector of the U.S. economy.

    Regarding their statement however, what they’re expressing would be consistent with their having declared the recession to have begun in December 2007, prior to the positive economic growth that occurred during the second quarter of 2008 (in a lot of ways, it would have made more sense for the NBER to have declared the current recession to have really begun in April 2008.)

  15. rootless_cosmopolitan says:


    ““Employment” is a massively lagged indicator. If you look at the last recovery… the first time you could call a material downtrend in the unemployment rate was Dec, 2004. But the recession ended in winter 03/04 (12 months earlier).”

    If I understand this correctly, you back up your assertion with a statistical sample that has a sample size of 1, don’t you?


  16. rootless_cosmopolitan says:

    What about looking at the creation of new private credit as an indicator where the economy is headed? Over the last three decades private credit had to about double every ten years to get economic growth in the expansion phases of the business cycle. Well, what are the odds that households and businesses (excluding the financial sector) are going to load another 25 trillion US-dollars of debt on their balance sheets over the next ten years? Can they do it?


  17. rootless_cosmopolitan says:


    “You’ll see the same thing this time… unemployment rate in material downtrend by YE2010.”

    You seem to assume that the economy will have gone back by then to business as usual as it had been before the GFC. What makes you think this?


  18. Transor Z says:

    I’m gonna stick with Rosie on employment as a coincident indicator during credit deleveraging cycles:

  19. Invictus says:

    Excellent catch, Transor. I’m with you on that, for sure.

  20. [...] Why hasn’t the NBER declared this recession over already?  (Big Picture) [...]

  21. call me ahab says:


    this “ain’t” your father’s recession-

    Once you understand that- you might be able to shake all that nonsense bouncing around in your head

  22. DeDude says:

    “Stimulus is a carry-forward of future taxes, hence is not ‘growth’”

    Actually any kind of debt based economic growth whether in the public or private sector is basically fake growth borrowed from the future. But if growth on borrowed money has to be subtracted (and maybe it should) then the whole Bush decade was one long recession.

  23. DeDude says:

    “In my business, when I consult someone nearing retirement without enough saved to retire on, we suggest that they consider working longer if possible. In the back of my mind I am thinking “what if they don’t have a choice but to drop out of the workforce?”

    That is the Rock and a Hard place where a lot of older baby-boomers are stuck right now. They do not have the money to retire and they do not have a job or prospect of a job . The solution is actually to make a decision of permanently lower spending for the rest of their lives. Wonder how the suicide rates in that group is doing.

  24. Mannwich says:

    @ahab: By the time it becomes truly apparent that’s the case to the Sheeple, people like cognos won’t be posting their comments on the TBP anymore.

  25. Mannwich says:

    @DeDude: That’s my hypothesis – that the whole Bush decade was a recession papered over by cheap/easy credit. It was their only way to spur a fake recovery after the fakery/fiasco and get re-elected.

  26. sparrowsfall says:

    >The Committee … has no fixed rule

    Exactly my impression recession dating in general.

    What we have is a group of nodding sages standing at the taffrail, holding up their collective thumbs, and squinting at the wake.

    And those sages change over time, as do their perceptions, theories, and analytical methods–their squints and their thumbs.

    I find it stunning that so many economists seek to build statistical correlations based on the quite arbitrary “starts” and “ends” of recessions.

    The word “recession” is useless as a quantitative measure. When I see papers that use them, I downgrade their value by a large percentage.

  27. Mannwich says:

    @ahab: No, but I sparred with him via email several times in ’07/’08. Quite an irascible fellow. Wanted to “short me”. I wish I had saved the emails. LOL.

  28. Mannwich says:

    @ahab: Read through some of the reader reviews on Amazon in the link that you sent. They are priceless! Normally, writers likely have their friends/allies write glowing reviews as “plants” to pump the book. Bowyer apparently doesn’t even have enough of those people to help him out a little. LOL.

  29. Invictus says:

    @Manny: I’ve sparred with him, too, and I think I have saved the emails. Perhaps I’ll search for them and post them. The upshot of our exchange was that he’s a douchebag.

  30. Mannwich says:

    @Invictus: You should do that! That would be awesome. He’s a class A d-bag, for sure.

  31. [...] tip on these references to The Big Picture. Leave a [...]

  32. [...] – NBER and double-dip intrigue. [...]

  33. cognos says:

    @Guys –

    What are you even saying? That GDP wont be 5% in Q4… sure, maybe it’ll be 4% or even 3.5%. The lower it is in Q4 the higher it will be in Q1. The US economy is a battleship.

    It already looks pretty good for everyone to have a good positive Q1… business as usual is returning and there is plenty of spring-back growth, low rates work, and profits = risk-taking = profits. But you guys think the “whole system is broken”.

    At what point in the continuing recovery do you give up that thesis?

    Doesnt it seem like the only “double-dip” is in your portfolios? The recovery has already be far more profitable on the upside than the recession was in the downside. I’d say, buy the 5-10% dips for the next 3 years. Fear remains very high.

  34. [...] Daniel at 22 January, 2010, 10:02 am The Big Picture has picked up on what appears to be an interesting development over at the NBER’s site. It seems [...]

  35. [...] Last week I pointed out a somewhat mysterious, undated entry (turned out to be Nov. 24, 2009) at the website of the “official” arbiters of recession, the NBER. [...]