Gregory Mankiw Victor Zarnowitz January 13, According to the
Nber dating recent data, Nber dating U. Real personal income has generally been growing over the past year, while employment fell significantly in both November and December Recent data
Nber dating our earlier conclusion that additional time is needed to be confident about the interpretation of the movements of the economy last Nber dating and this year.
The NBER's Business Cycle Dating Committee will determine the date of a trough in activity when it concludes that a hypothetical subsequent downturn Nber dating be a separate recession, not a continuation of Nber dating past one. The trough date will mark the end of the recession.
committee will not issue any judgment about whether the economy has reached a trough until it makes its formal decision on this point. The committee waits for many months after an apparent trough to its decision, because of data revisions and the possibility that the contraction would resume. For example, the committee waited until to announce that a trough had occurred in March In November
Nber dating committee determined that a peak in business activity occurred in the U.
A peak Nber dating the end Nber dating an and the
Nber dating of a recession. The determination of a peak date in
Nber dating is thus a determination that the expansion that began in March ended in March Nber dating a recession began in March.
The expansion lasted exactly 10 years and was the longest in the NBER's chronology. A recession is a significant decline in activity spread across the economy, lasting more than a few months,
Nber dating in industrial production, employment, real income, and wholesale-retail sales.
A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough Nber dating peak, the economy is in an expansion.
Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades. Because a recession influences
Nber dating economy broadly and is not confined to one sector,
Nber dating committee emphasizes economy-wide measures economic activity.
The Nber dating dating role of the committee
Nber dating to maintain a monthly chronology, so the committee refers
The committee gives
Nber dating little weight to real GDP because it is only measured quarterly. The committee generally studies two monthly measures Nber dating activity across the entire economy: In addition, the committee refers to two indicators with coverage primarily of manufacturing Nber dating goods: Because manufacturing is a relatively small part of the economy, the movements of these indicators often differ from those reflecting other sectors.
Although the four indicators described above are the most important measures considered the NBER in developing its business cycle chronology, there is no fixed rule about which Nber dating measures contribute information to the process. Figure 1 shows the recent movements of employment superimposed on the average movement over the past six recessions. Employment reached a peak in March and declined through April Current revised data show that employment rose Nber dating from May through October with a slight decrease in Nber dating fell by 88, in andin the most recent reported month.
Employment in December was only 29, above its lowest post-peak Nber dating, that of April Figure 2 shows the movements of real personal income less Nber dating. Real income generally fell from late through lateand generally rose through the most recently reported month, Octoberexcept for a slight decline in July.
This indicator is now slightly above its previous peak November Figure 3 shows industrial production. A peak occurred in June and the index declined over the next 18 months by 7. Industrial production rose between January and Septemberfell in October, but rose slightly again in November, the
Nber dating recent reported month. Figure 4 shows real manufacturing and wholesale-retail sales.
This measure reached a peak in Junedeclined until it plunged in Septembergenerally grew through Julybut then declined through October, the most recent reported month. It is still above its level at the peak in March Current Employment The dark line shows the movement of employment in and the shaded line the average over the past 6 recessions.
Nber dating Personal Income Less Transfers The dark line shows the movement of income in and the shaded line the average over the past 6 Nber dating. The Conference Board http: Industrial Production
Nber dating dark line shows the movement of industrial production in and the Nber dating line the average over the past 6 recessions.
Real Manufacturing and Wholesale-Retail Sales The dark line shows the of sales Nber dating and the shaded line average over the past 6 recessions. Inindicators measuring output and income generally have been rising, while employment has been essentially constant until its significant decline in the
Nber dating two months. The primary factor accounting for the more favorable performance of income and production relative to employment is the continuation of rapid productivity growth resulting in corresponding growth in real wages.
According to data released in December http: GDP reached a peak in the fourth quarter of This was followed by contraction during the first three Nber dating of and growth since then. In the fourth quarter ofreal GDP surpassed the earlier peak.
This Nber dating of real GDP is consistent with the other data considered by the committee. Output fell less than during the Nber dating and currently is rising faster than employment because of unusual productivity growth. For more information, see the FAQs at the end of this memo, and also see http: Files containing the data and figures is available from that page as well. Suppose the current weakness Nber dating the economy continues, contrary to current forecasts.
How will the NBER decide about turning points? The first
Nber dating be to determine if the
Nber dating of weakness that began in late amounts to a recession. In this determination, we would refer to our Nber dating criteria of depth, duration, and dispersion.
The definition of a recession is stated in the
Nber dating paragraph of this memo. The second step would be to determine if the recession Nber dating dating in late was a continuation of the recession that we have already determined began in March We would decide in favor Nber dating a single, longer recession if we determined that economic activity in the period from March Nber dating late never surpassed its peak in March Here, we would have Nber dating reconcile the conflicting behavior of and employment.
Output surpassed its previous peak in latewhile employment rose only slightly from its lowest level of Nber dating to the highest level it reached inin August.
At that time, employment was still 1. The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP. How does that
Nber dating Nber dating the NBER's recession dating procedure?
Most of the recessions identified by our procedures Nber dating consist of two or more quarters of declining real GDP, but not all of them.
According to current data forthe present recession falls into the general pattern, with three consecutive quarters of decline. Our procedure differs from the two-quarter rule in a number of ways. we use monthly indicators to arrive at a monthly chronology. Second, we use indicators subject to much less frequent revision. Third, we consider the
Nber dating the decline in economic activity.
Recall that our definition includes the phrase, "a significant decline in activity. Some observers, however, cite April as Nber dating start of the recession, reasoning
Nber dating if the peak ended in March, then the recession began in April. The exact peak occurred sometime in March.
For the rest of the days in March, the economy was in recession. the expansion ended and the recession began Nber dating March. Isn't a recession a period of diminished economic activity? It's more accurate to say that a recession-the we use the Nber dating a period of Nber dating activity rather than diminished activity.
We identify a month when Nber dating economy reached a peak of activity and a later month when the economy a trough. The time in between is a recession, a Nber dating when the economy is contracting. The following period an expansion. Economic activity
Nber dating below normal or diminished for some of the recession and for some Nber dating of the following expansion as well.
Some call the period of diminished activity a slump. Following the precedents established Nber dating many decades of maintaining Nber dating business cycle chronology, the NBER considers employment, production, sales, and real income.
When special factors-such as unusual productivity growth and favorable shifts in the terms of trade-make income
Nber dating production-based measures move differently from those based
Nber dating employment, we Nber dating the two types of evidence. You emphasize the payroll survey as a source for data on economy-wide employment.
What about the household survey? Although the household Nber dating is a large, well-designed probability sample of the U. The two sources agree reasonably closely Nber dating the movement of employment
Nber dating this recession.
A bulge in jobless claims would appear to forecast Nber dating employment, but we don't use forecasts and the claims numbers have
Nber dating lot of noise.
Unemployment is generally a lagging indicator. Its rise from a Nber dating low Nber dating to date is consistent with the employment data. Nber dating do structural changes in Nber dating economy in the s affect the NBER's method for dating business cycles?
The Bureau notes that industrial production Nber dating a declining part of the economy.
What other Nber dating for output bear watching, particularly with regard to service-sector activity? Economy-wide employment and real personal income are the most important monthly indicators. At a quarterly frequency, real GDP Nber dating informative. Nber dating interesting indicator is aggregate hours of work. Regarding movements of Nber dating as an indicator of recessions, isn't it true that real income has not bfallen substantially during five of the past nine recessions?
Is the NBER committee considering re-dating the beginning of the recession, based on the
Nber dating GDP data which seem to indicate that the peak of the last cycle was reached before your current date?