How Can the NBER Claim the Great Recession is Over?
Posted: September 22nd, 2010 | Author: Joe | Filed under: Economy, Employment | Tags: Economy, Employment, Recession | 2 Comments »Can someone please explain this to me?
“The longest recession the country has endured since the Great Depression ended in June 2009, a group that dates the beginning and end of recessions declared Monday.”
According to The National Bureau of Economics (NBER), the recession ended last year, in June 2009. Not only does this ring hollow with near 10% unemployment and no sign of it falling any time soon, but it just doesn’t make sense when you look at the data and match it to the start and end dates given by NBER.
I understand that unemployment is a lagging indicator and it will take a while for it to come back down. I get that. But I also understood a recession as being defined by “2 or more consecutive quarters of negative GDP growth”. In other words, a shrinking economy.
But as this data shows the U.S. economy didn’t have 2 consecutive quarters of negative growth until the second half of 2008 – fully 6 months after the NBER’s claim of December 2007 as the start of the recession!
US GDP 2006-2010
However, if you look at when unemployment began to rise, it was 2007 ( data from the U.S. Bureau of Labor Statistics):
But if we’re using the unemployment rate to determine the start of recession, shouldn’t we use that to determine the end? Or, conversely, if we use GDP to determine the end, shouldn’t that be the metric for the start?
I’m really trying to reconcile this with some sort of impartial logic, but I can’t help but wonder if the reason is really political.
Paragraphs like this one from an AP article make me wonder if the dates and data are being chosen simply to place 2 recessions under one unpopular republican president:
“In President George W. Bush’s eight years in office, the United States fell into two recessions. The first started in March 2001 and ended that November. The second one started in December 2007”
Somebody tell me I’m wrong. Someone explain to me how the recession can impartially and objectively be said to have started in December 2007, and end in July of 2009, because it just doesn’t add up to me.
I don’t see how it could be to squeeze the call for the start of it to be under the wire into the Bush presidency. If they waited until the start of two consecutive negative GDP quarters then they could have said June 2008 rather than December 2007 but George Bush was president either way.
The NBER does not use the rule of thumb for picking start and ends of recessions. They look at more data. Clearly there was a big dropoff in activity after Q42007 and even though there was a tiny positive growth in Q12008, this, felt the NBER, was not enough to counter the trend.
@Joe,
I see your point about it being within the Bush presidency either way, but there is a difference in degrees… if they waited until 2008, then the right would be more apt to say it started under Bush, but really got going under Obama. Whereas stating it started in 2007 gives less “wiggle room”.
Either way, it’s hard to find data (other than the stock market rally) that supports the recession ending in 2009.