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Are we still in a recession?

What to expect from the NBER business cycle dating committee

The Downturn and Rebound

  • April 29, 2020: In its advance estimate, the Bureau of Economic Analysis (BEA) reported that real GDP for the first quarter of 2020 fell at a 4.8% annual rate.
  • May 8, 2020: The Bureau of Labor Statistics reported that nonfarm payrolls fell by 20.5 million in April—the largest one-month percentage decline on record (dating back to 1939).
  • June 8, 2020: The National Bureau of Economic Research Business Cycle Dating Committee (NBER BCDC) announced that the 128-month expansion (the longest in U.S. economic history, dating back to 1854) ended sometime in February 2020.
  • Since then, the U.S. economy has rebounded sharply, posting large increases in real GDP and nonfarm payroll employment and a large decline in the unemployment rate. But the NBER BCDC hasn’t yet announced an end to the recession…

The BCDC’s Methods

The BCDC patiently assesses business cycle peaks and troughs. For example, they announced that the trough of the 2007-2009 recession occurred in June 2009 only on September 20, 2010—which is a lag of 15 months.

The BCDC also emphasizes economywide economic indicators. In their view, dating peaks and troughs is best accomplished by looking at measures of activity that cut across all sectors of the economy, rather than a small number of key sectors (such as the Federal Reserve’s industrial production index, which measures output produced by the nation’s manufacturers, utilities, and mining industry). In their June 8 announcement, the BCDC indicated that real GDP and real gross domestic income (GDI) are the two “most reliable” comprehensive measures of economic activity.

The FRED graph above shows real GDP data from the BEA: Real GDP fell in the first and second quarters of 2020, but then rebounded in the third quarter. However, unlike real GDP, real GDI isn’t yet available for the third quarter because the BEA hasn’t yet reported corporate profits—a key component of GDI. Corporate profits will be reported in the second estimate of GDP, scheduled for release on November 25.

What Else Do They Look At?

Over time, the BCDC has examined several comprehensive monthly indicators, such as real manufacturing and trade sales, nonfarm payroll employment, and civilian employment. In its September 2020 announcement, the BCDC emphasized that real personal consumption expenditures and real personal income excluding current transfer payments are the two broadest measures of aggregate expenditures and aggregate income. Use this FRED dashboard to follow such comprehensive indicators. April 2020 was the trough month of all five of these indicators. Moreover, each of the indicators has since risen sharply, consistent with the increase in real GDP.

What’s Different This Time?

As noted above, the BCDC generally prefers to wait until there’s conclusive evidence that the economy has transitioned from a period of recovery to expansion. The unique features of this pandemic-spawned recession have, as the BCDC noted on June 8, 2020, “resulted in a downturn with different characteristics and dynamics than prior recessions.” So, while the data suggest that an economywide trough in economic activity occurred sometime in the spring, the pandemic remains a key driver of economic policy and the behavior of many governments and individuals worldwide. From that standpoint, the length and strength of the recovery is uncertain.

How this graph was created: Search FRED for real GDP, select the series, and start the sample period on 2014-01-01.

Suggested by Kevin Kliesen.

View on FRED, series used in this post: GDPC1

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