There seems to be growing consensus that the recession ended some time in mid-2009 (June or July), and we recently pointed out that regional St. Louis Fed economists have placed their bets on a July 2009 trough. Now it’s up to the NBER.

We know that they weigh a variety of economic indicators, including Employment, Industrial Production, Real Income, and Real Retail Sales (tracked here at the St. Louis Fed). Business Cycle Dating Committee member Jeffrey Frankel likes to look at aggregate hours, too. In the real world, all of this is mostly an academic exercise in any event — Americans, like Associate Justice Potter Stewart once famously said on a different topic altogether, know a recession when they see one, and they also generally have a pretty good idea when it’s ended.  (I take pride in having nailed the NBER’s call that the recession began in December 2007 while blogging elsewhere.)

But what about GDP? How does it figure into the equation? We’ve had two consecutive quarters of growth, including the 5.9 percent of Q4 2009. How will that play?

Well, it’s a interesting question, as the NBER has very contradictory and conflicting information at its own website about how it weighs the evidence:

In announcing the 2001 recession, the NBER said (emphasis mine):

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 and it is subject to continuing, large revisions.

Got that?  Okay, let’s move on.

October 21, 2003 Memo from the Committee (not coinciding with a peak or trough announcement; emphasis mine):

The committee views real GDP as the single best measure of aggregate economic activity. In determining whether a recession has occurred and in identifying the approximate dates of the peak and the trough, the committee therefore places considerable weight on the estimates of real GDP issued by the Bureau of Economic Analysis of the U.S. Department of Commerce. The traditional role of the committee is to maintain a monthly 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 determine the months of peaks and troughs.

Although the Committee qualifies its October 2003 remarks by mentioning the need to maintain a monthly chronology, the two comments nonetheless seem contradictory to me, and flip-flop the importance of what is to be considered.

Whichever way they eventually call it, the NBER will have a document to which it can point to support its decision.  Is it time — or long past — to formalize what it means to be in, or out of, recession?  If so, my vote might easily go to the Chicago Fed’s National Activity Index.



The Chicago Fed provides the following bogeys:  “A CFNAI-MA3 value below –0.70 following a period of economic expansion indicates an increasing likelihood that a recession has begun. A CFNAI-MA3 value above –0.70 following a period of economic contraction indicates an increasing likelihood that a recession has ended. A CFNAI-MA3 value above +0.20 following a period of economic contraction indicates a significant likelihood that a recession has ended.”  It is an excellent indicator.

Category: Data Analysis, Economy, Research

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.

15 Responses to “NBER: Having It Both Ways?”

  1. Marcus Aurelius says:

    The recession is over in the same sense that the Titanic didn’t sink (the experts said it was unsinkable, so, of course, it couldn’t have sunk).

  2. MayorQuimby says:


    These charts and stats are both ridiculous and worthless. .gov has borrowed trillions and poured it into the economy to overpay for securities, add leverage, pay UE extensions for almost 2 years and bail out any one and everyone. There IS no real economy – just the borrowed appearance of one. When the economy can stand on its own, without any gvmt intervention – THEN and ONLY THEN will ANY of these charts mean anything. Since the gvmt Debt-to-DP ratio including unfunded liabilities is now OVER 500%, I’d say the plug is gonna be pulled VERY soon on all this gvmt printing and bailing everyone out. When that happens, reality will be forced upon us all in a terribly ugly way.

  3. xon says:

    “. . .Business Cycle Dating Committee member Jeffrey Frankel . . .”

    Is this a new singles website?

  4. elwood says:

    Tim Geithner was on MSNBC last night (TRMS) and declared the recession to be over. I think that’s the first time I heard it from an administration official.

  5. Mannwich says:

    Is this what a “recovery” looks like? Maybe if all of us could live rent-free for three whole years, the economy would explode? Maybe that’s the next policy from the Feds? I hope so. I want my free lunch too.

  6. Marcus Aurelius says:

    Manny: Define “lunch.” Nothing like a blenderized baloney smoothie.

  7. DaveB says:

    I hope BR will indulge …..this is way off topic but I have respect for some of the brightest minds that frequent this place, so I just have two questions:

    What is the best way to buy physical gold. Who ? How ?

    Why would any intelligent person pay $250 for PCLN ?


  8. Transor Z says:


    Exactly, dating the “recession” tells us very little about conditions “on the ground.” Go apply for a small business loan or LOC and tell me how things are. The bk biz is booming, folks.

  9. Mannwich says:

    @Transor: I already have. DENIED. And with a pristine 800ish credit FICO score too. What’s the point of playing by the rules? Gotta play by THEIR rules (no rules) to win this gamed game.

  10. Mannwich says:

    @MA: That’ll do. I just want something other than a “thanks for playing” kick in the nuts for my misguided efforts in trying to do the right thing.

  11. zell says:

    The positive amplitude’s not looking too good since the S&l dive. Weak; considering since Gspan juiced the economy after that; then came the tech expansion into the tech bubble; followed by a more severe juicing in the early oughts; and then the housing bubble & and financial chicanery takes us deep. The Feds thrown everything it has and some stuff it doesn’t have and the economy is just nearing the surface where the light is penetrating but at most we’ll get a gulp of air before we go down to the deep since there’s nothing left to keep us up. Take a deep breath soon and hold it for a decade or two.

  12. Jerry 369 says:

    Take a deep breath and hold it it for a decade or 2….That is genius. I might add, this generation,the progressive movement in it, is ready to subject the next 2 generations of not even born yet americans to a lower standard of living. This is math,pure and simple! Things will clear,at some point,somehow. We can fight it,or get on with it. The damage’s inflicted to this point are quickly becoming lethal,we are bleeding out here! Stand up! Speak out,just say no! Call your elected official. Scream at them,nicely! Show your frustration….Stop all spending! Period.

  13. willid3 says:

    are we sure we ever got out of the previous recession? after all, it never really appeared, all that we got was the credit boom which has lead to an even worse down turn. had people not gotten so into credit to paper over collapsing incomes, we would still be in that recession, we just wouldn’t have the great recession ot deal with

  14. Jim C says:

    I find it interesting that the much despised Cramer called the date the recession would end virtually to the day many months ahead of time.