The Business Cycle Dating Committee of the National Bureau of Economic Research announced today that the eleventh U.S. postwar recession began in December of 2007.
As has often been the case historically, the announcement itself is a bit anticlimactic, in that pretty much everybody had already reached the same conclusion. I was interested to see that the Business Cycle Dating Committee explained the apparent non-recessionary behavior of real GDP in 2008:Q1-Q2 just as
we did last September
in terms of the statistical discrepancy between GDP and GDI. From the NBER:
The committee believes that the two most reliable comprehensive estimates of aggregate domestic production are normally the quarterly estimate of real Gross Domestic Product and the quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic Analysis. In concept, the two should be the same, because sales of products generate income for producers and workers equal to the value of the sales. However, because the measurement on the product and income sides proceeds somewhat independently, the two actual measures differ by a statistical discrepancy. The product-side estimates fell slightly in 2007Q4, rose slightly in 2008Q1, rose again in 2008Q2, and fell slightly in 2008Q3. The income-side estimates reached their peak in 2007Q3, fell slightly in 2007Q4 and 2008Q1, rose slightly in 2008Q2 to a level below its peak in 2007Q3, and fell again in 2008Q3. Thus, the currently available estimates of quarterly aggregate real domestic production do not speak clearly about the date of a peak in activity.
Mechanical algorithms based on the monthly values of non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales are updated independently (with slightly different specifications) by Professor Jeremy Piger of the University of Oregon and Professor Marcelle Chauvet of the University of California, Riverside. Their separate indexes are both now indicating a 99% probability of recession.
The Econbrowser recession indicator index, which is based solely on the GDP numbers, has not yet triggered a recession call. I am expecting it to do so when the 2008:Q4 GDP numbers are released at the end of January.
As on so many other matters, Calculated Risk was way ahead of the curve. CR began in March of 2008 to add shading to his graphs to indicate that a recession began in December 2007.