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Is U.S. in Recession? Discussions Begin
Stanford economist Robert Hall, chairman of the National Bureau of Economic Research committee that dates recessions, is far from announcing whether such an event has started. But he and his colleagues on the NBER’s Business Cycle Dating Committee have taken a key step: The usually dormant panel has started discussing the economic data.
The weak December employment report released at the beginning of this month was “the crystallizing event” that spurred the early discussions by e-mail, Mr. Hall said in an interview. “That’s the first I heard from any member saying, ‘Let’s look at some numbers.’”
The seven-member committee won’t be announcing a starting date for a recession, if one were to occur, until it can be said definitively that a recession has started, Mr. Hall said. Economic data are too volatile to make any judgments this early. “Our ability to forecast these things is extremely poor,” he said. “Lots and lots of people have talked about recessions when they didn’t occur.”
The 87-year-old NBER, a nonprofit group of 600 academic economists, has become the unofficial arbiter of when recessions begin and end. Its definition of a recession: “A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” A simple rule of thumb is two straight quarters of declining GDP, but that is not necessary for the group to declare a recession.
The NBER committee has been following the tracking data on monthly GDP by the forecasting firm Macroeconomic Advisers, but those figures haven’t moved enough to make a meaningful early determination. “It confirms what the employment numbers said,” Mr. Hall said. “At best the economy is flat right now. It stopped growing.”
The latest stock market turmoil may not be a great indicator. In 1987, when the stock market crashed, the overall economy grew. “This question of just how important the stock market is by itself is quite unresolved,” Mr. Hall said. “We don’t know if it’s over-responding or under-responding.”
Discussions in Washington about a fiscal-stimulus package probably wouldn’t be enough to influence the economy in a big way, he says, because of how long it would take the government to get money into consumers’ hands. The Fed’s actions today are a much bigger factor with a “powerful” effect, he said. “The Fed can turn on a dime as it did this morning. Claims that it’s lost its grip on the economy are misplaced.”
The NBER committee doesn’t meet regularly in person (the last time was at an American Economic Association gathering in 2004), though it would initiate conference calls if it were to get closer to determining a recession starting point. “The committee is very retrospective,” Mr. Hall said. “We like to wait long enough until we can get it right the first time. We want that date to stay for a century.”
He adds: “We’ll just put up with the excoriation we get in the financial press that it takes too long to point out the obvious. That’s how it works: We’re proud of it, and we’re going to stay that way.” –Sudeep Reddy
Stanford economist Robert Hall, chairman of the National Bureau of Economic Research committee that dates recessions, is far from announcing whether such an event has started. But he and his colleagues on the NBER’s Business Cycle Dating Committee have taken a key step: The usually dormant panel has started discussing the economic data.
The weak December employment report released at the beginning of this month was “the crystallizing event” that spurred the early discussions by e-mail, Mr. Hall said in an interview. “That’s the first I heard from any member saying, ‘Let’s look at some numbers.’”
The seven-member committee won’t be announcing a starting date for a recession, if one were to occur, until it can be said definitively that a recession has started, Mr. Hall said. Economic data are too volatile to make any judgments this early. “Our ability to forecast these things is extremely poor,” he said. “Lots and lots of people have talked about recessions when they didn’t occur.”
The 87-year-old NBER, a nonprofit group of 600 academic economists, has become the unofficial arbiter of when recessions begin and end. Its definition of a recession: “A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” A simple rule of thumb is two straight quarters of declining GDP, but that is not necessary for the group to declare a recession.
The NBER committee has been following the tracking data on monthly GDP by the forecasting firm Macroeconomic Advisers, but those figures haven’t moved enough to make a meaningful early determination. “It confirms what the employment numbers said,” Mr. Hall said. “At best the economy is flat right now. It stopped growing.”
The latest stock market turmoil may not be a great indicator. In 1987, when the stock market crashed, the overall economy grew. “This question of just how important the stock market is by itself is quite unresolved,” Mr. Hall said. “We don’t know if it’s over-responding or under-responding.”
Discussions in Washington about a fiscal-stimulus package probably wouldn’t be enough to influence the economy in a big way, he says, because of how long it would take the government to get money into consumers’ hands. The Fed’s actions today are a much bigger factor with a “powerful” effect, he said. “The Fed can turn on a dime as it did this morning. Claims that it’s lost its grip on the economy are misplaced.”
The NBER committee doesn’t meet regularly in person (the last time was at an American Economic Association gathering in 2004), though it would initiate conference calls if it were to get closer to determining a recession starting point. “The committee is very retrospective,” Mr. Hall said. “We like to wait long enough until we can get it right the first time. We want that date to stay for a century.”
He adds: “We’ll just put up with the excoriation we get in the financial press that it takes too long to point out the obvious. That’s how it works: We’re proud of it, and we’re going to stay that way.” –Sudeep Reddy
Although we beetch and moan about the deficit and the growing national debt, more worrisome is the huge trade imbalance, the record amount of consumer debt and the collapse of consumer confidence. We've been living beyond our means for too long, and it's getting time to pay the piper.
They'll want every penny on time or they'll really start messing me about simply because I'm "middle class" and come from "High income home" according to them.
You should have worked at Wal-mart.
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