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National Bureau of Economic Research: Recession Began December of 2007


The National Bureau of Economic Research is the organization which is entrusted with dating economic cycles. Their changing of the rules for the previous cycle has caused a quiet revolt among economists, who went back to citing the traditional rule of thumb that a recession is two consecutive quarters of negative GDP growth.

This time, however, the NBER relied on payroll data more heavily than last time, and in their press release noted the following points:

  1. Payrolls have been declining since December 2007.
  2. They looked at GDI – Gross Domestic Income, as well as GDP. Since GDI has never recovered to it’s 2007 peak, in effect, they relied on an income recession. Since GDP and GDI should be the same in theory, but in practice there are statistical differences, the NBER effectively sided with those of us who have been arguing that we were a statistical breath of wind from a classical recession.
  3. They looked at other sets of data, and while some peaked later, they took the earliest date.

Some notes: first, it is clear what a disaster last year’s attempt at stimulus was, it basically lurched the economy forward only into June. They noted that manufacturing data shows that industrial output is "substantially" below it’s peak – by almost 5%.

At 11 months and counting, this current recession looks to join the longest recessions of the post war era – the 1973-75 recession, and the 1981-82 recession. Though it should be remembered that the early Reagan Administration Recession was part of a double dip which featured a short recession in 1980, before diving back down again.

(FYI: The entire press release has been posted on Oxdown because the NBER server is having trouble keeping up.)

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