Friday, November 07, 2008
It would be interesting to know how long after the "official" beginning of past recessions the National Bureau of Economic Research has waited before declaring it so.
Having heard the span of six to eight months tossed around from time to time, you'd think that we've got to be getting close to an "announcement" right about now.
Then again, the recession earlier in the decade didn't "officially" start until about six months after the first quarter of negative economic growth, right around the time that the first 250,000+ month of job losses was reported (see this post from earlier in the day for historical payrolls data).
By that standard, we'll probably have to wait until next spring for the NBER to weigh in.
Some are getting a little itchy for the recession call to be made, the latest hankering for it to be made official coming from Paul R. LaMonica in this story at CNN/Money.
Call it a recession, alreadyA couple of data points appear later in this story.
The National Bureau of Economic Research gets to make the official call. What's it waiting for?
Nearly 1.2 million jobs have been lost this year. The unemployment rate is at its highest level since 1994. Retail sales were dismal last month and for automakers, October was the worst month in more than a quarter-century.
But guess what? The United States is still not officially in a recession.
That's because a recession is only defined by a group of academics called the National Bureau of Economic Research.
It's not the media's call. It's not the President's or Congress' call. Federal Reserve Bank of Atlanta president Dennis Lockhart said in a speech Friday that the data "indicate" we are in recession, but heck, even Fed chair Ben Bernanke doesn't get to make the call.
According to the NBER's Web site, a recession "is 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."
Hmmm. Now let's see. Significant decline in activity across the economy? Check.
Has it lasted more than a few months? Check.
Has it shown up in GDP, the job market and with manufacturers and consumers? Uh...check.
"It is academic at this point," said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida in Orlando. "It might just settle a few bets in the faculty lunch room. The credit freeze was the death blow that pushed an economy that was teetering on the edge of recession into one."
So what's the NBER waiting for? And by the time it finally states the obvious, will anyone care?
The recession that began in March 2001 was made official in November of that same year and the recession that began in July 1981 was made official in January of 1982.
Depending upon how the spring stimulus-induced spending surge and the now faltering export boom are factored in with the modest decline in economic growth during the fourth quarter of last year, the "official" beginning of the recession could occur anytime over the last year.
So, look for the NBER to make it official anytime over the next six or eight months.