![]() The committee does not directly consider inflation however, it is embedded in the real income and spending variables it tracks, including those plotted in Figure 1. And while real income net of transfers has been flat in recent months, industrial production, employment, and real spending have grown this year. economy since the start of the pandemic, and have continued to expand through the first half of this year. All of these indicators have exhibited strong growth in the U.S. So how might the NBER committee assess the health of the economy?įigure 1 shows the trend in four of the NBER committee’s recession-indicator variables-real income minus transfers, real spending, industrial production, and employment-relative to their values in April 2020 (the trough of the last recession, and thus, the month before the current expansion began). Notably, there are no fixed rules or thresholds that trigger a determination of decline, although the committee does note that in recent decades, they have given more weight to real personal income less transfers and payroll employment.Īlso, because the committee depends on government statistics that are reported at various lags, it cannot officially designate a recession until after it starts. The National Bureau of Economic Research (NBER) Business Cycle Dating Committee-the official recession scorekeeper-defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” The variables the committee typically tracks include real personal income minus government transfers, employment, various forms of real consumer spending, and industrial production. ![]() Based on these data, it is unlikely that the decline in GDP in the first quarter of this year-even if followed by another GDP decline in the second quarter-indicates a recession. Instead, both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data-including the labor market, consumer and business spending, industrial production, and incomes. What is a recession? While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle.
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