While the U. How are these things measured, and who decides when a recession starts and ends? The committee uses a range of economic indicators in addition to GDP, such as employment and personal income, to determine periods of expansion and contraction, and pays particular attention to monthly indicators. Aside from the duration, the depth of the decline in economic activity is also an important factor in recessions. The Committee waits until the existence of a peak or trough is not in doubt, and until it feels confident about assigning an accurate date to those limits. It then pronounces the time between the peak and trough a recession. Cancel Reply Your email address will not be published. Don’t subscribe All Replies to my comments Notify me of followup comments via e-mail. You can also subscribe without commenting. Comments are intended to be a forum for open, respectful, and family-friendly discussion.
Topic Areas About Donate. Brian W. Cashell Specialist in Macroeconomic Policy Government and Finance Division Summary A recession is one of several discrete phases in the overall business cycle. The term may often be used loosely to describe an economy that is slowing down or characterized by weakness in at least one major sector like the housing market.
The Business Cycle Dating Committee, which tracks and dates business cycles for the National Bureau of Economic Research, said the.
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What is a recession: Yahoo U
How does the Committee Define a Business Cycle? See Methodology. What data does the Committee use?
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.
Burns and Wesley C. Mitchell, Measuring Business Cycles, remains definitive today. In essence, business cycles are marked by the alternation of the phases of expansion and contraction in aggregate economic activity, and the comovement among economic variables in each phase of the cycle. Aggregate economic activity is represented by not only real i. A popular misconception is that a recession is defined simply as two consecutive quarters of decline in real GDP.
Notably, the —61 and recessions did not include two successive quarterly declines in real GDP. A recession is actually a specific sort of vicious cycle, with cascading declines in output, employment, income, and sales that feed back into a further drop in output, spreading rapidly from industry to industry and region to region.
This domino effect is key to the diffusion of recessionary weakness across the economy, driving the comovement among these coincident economic indicators and the persistence of the recession. On the flip side, a business cycle recovery begins when that recessionary vicious cycle reverses and becomes a virtuous cycle, with rising output triggering job gains, rising incomes, and increasing sales that feed back into a further rise in output.
The recovery can persist and result in a sustained economic expansion only if it becomes self-feeding, which is ensured by this domino effect driving the diffusion of the revival across the economy.
UHERO 101.6: Recession Dating
Reuters – The U. The designation was expected, but notable for its speed, coming a mere four months after the recession began. The committee has typically waited longer before making a recession call in order to be sure. When the economy started declining in late , for example, the group did not pinpoint the start of the recession until a year later. The unemployment rate rose from a record low of 3.
Table 1 compares business cycle durations for national recessions as defined by the NBER to the recession dates produced by applying the Bry & Boschan ().
The chronology identifies the dates of peaks and troughs that frame economic recession or expansion. The period from a peak to a trough is a recession and the period from a trough to a peak is an expansion. According to the chronology, the most recent peak occurred in March , ending a record-long expansion that began in The most recent trough occurred in November , inaugurating an expansion. 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.
A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and 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. In choosing the dates of business-cycle turning points, we follow standard procedures to assure continuity in the chronology. Because a recession influences the economy broadly and is not confined to one sector, we emphasize economy-wide measures of economic activity.
We view real GDP as the single best measure of aggregate economic activity. In determining whether a recession has occurred and in identifying the approximate dates of the peak and the trough, we therefore place considerable weight on the estimates of real GDP issued by the Bureau of Economic Analysis BEA of the U. Department of Commerce. The traditional role of the committee is to maintain a monthly chronology, however, and the BEA’s real GDP estimates are only available quarterly.
U.S. & World
This report is also available as a PDF. The chronology identifies the dates of peaks and troughs that frame economic recessions and expansions. A recession is the period between a peak of economic activity and its subsequent trough, or lowest point. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief.
The committee has determined that a peak in monthly economic activity occurred in the U. The peak marks the end of the expansion that began in June and the beginning of a recession. The expansion lasted months, the longest in the history of U. The previous record was held by the business expansion that lasted for months from March to March The committee also determined that a peak in quarterly economic activity occurred in Q4. Note that the monthly peak February occurred in a different quarter Q1 than the quarterly peak.
Determination of the February 2020 Peak in US Economic Activity
Despite boasts during the boom years of the late s about taming business cycle downturns, the U. This recession ended a ten-year period of expansion in the national economy, the longest expansion in U. Official business cycle dates—the peaks and troughs in the economy that define recessions and expansions—in the U. A private, nonprofit, nonpartisan research organization founded in , the NBER is dedicated to understanding how the economy works.
Today it has over university professors and researchers who conduct empirical research on the economy as Bureau associates.
The Business Cycle Dating Committee’s general procedure for determining the dates of business cycles. The chronology identifies the dates of peak and trough months in economic activity. The peak is the month in which a variety of economic indicators reach their highest level, followed by a significant decline in economic activity. Similarly, a month is designated as a trough when economic activity reaches a low point and begins to rise again for a sustained period.
A: The NBER’s traditional definition of a recession is that it is a significant decline in economic activity that is spread across the economy and that lasts more than a few months. The committee’s view is that while each of the three criteria—depth, diffusion, and duration—needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another.
For example, in the case of the February peak in economic activity, we concluded that the drop in activity had been so great and so widely diffused throughout the economy that the downturn should be classified as a recession even if it proved to be quite brief. An expansion is a period when the economy is not in a recession. Expansion is the normal state of the economy; most recessions are brief. However, the time that it takes for the economy to return to its previous peak level of activity may be quite extended.
Q: If the most recent peak was in February , is it correct to say the recession started in February or in March? For the purpose of measuring how long a recession lasts, the first month of the recession is the month following the peak in economic activity and the last month is the month of the trough in economic activity. For instance, the most recent peak month was February and the first month of the subsequent recession was March The first month of an expansion is the month following the trough and its last month is the month of the following peak.