Insights into Editorial: The need for a business cycle dating committee

Gregory Mankiw has an interesting post on the question of when exactly did the recession start? Mankiw points out that four of the time series used in determining when recession start and end have been revised substantially and that the March dating of the recession is probably too late. There is quite a bit of validity to this claim, IMO. For example, look at the employment data. Frist up is the payroll survey. Clearly the time series reaches a local peak right about the data actually start declining in March of Next look at the unemployment rate, Again, we see that the rise in the unemployment rate is right around the start of January to be exact. That is, unemployment might continue to go down or not rise for sometime after the end of the recession.

How Many European Recessions?

What is the business cycle dating committee of the national bureau of economic research nber Frequently requested: Identifying the date of the trough involved weighing the behavior of various indicators of economic activity. That decision was made because of the numerous other indicators that reached their lows during the third quarter of

Recession bars provide a graphical representation of business cycles in the United States economy dating to based on cycle begin and end dates defined by the National Bureau of Economic Research’s Business Cycle Dating Committee.

A more productive debate would have been based on concrete estimates of what it would take to achieve a full economic recovery. This is because Congress gave more emphasis to dodging policies looming large in budgetary terms than policies looming large in economic terms. This current law economic forecast assumes that sequestration will take effect on March 1, as currently scheduled the cuts were delayed for two months by ATRA.

We estimate sequestration would reduce real GDP growth by 0. So even if the entire sequester were repealed without offsets—the optimal but seemingly unlikely policy outcome—average real GDP growth would be expected at roughly 2. More likely, the sequester will be replaced with a mix of revenue increases and spending cuts; this would imply real GDP growth between 1. Short of sharply reorienting fiscal policy to accommodate accelerated recovery, in U.

What is the Business Cycle and How Does it Work?

The unemployment rate remained at 4. The chart below shows the monthly percent change in this indicator since the turn of the century, a period that includes two recessions. The Problem of Revisions At first glance, this indicator appears to have a strong correlation with the business cycle. However, there is a major problem with this assumption: The data in this survey of business establishments undergo multiple revisions. The initial monthly estimate is subject to a first and second revision, subsequent benchmark revisions and annual revisions that stretch back many years the most recent includes revisions back as far as February

The NBER’s Business Cycle Dating Committee defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy.

The need for a business cycle dating committee Summary: It has not received sufficient attention. Most of the research in business cycles is done keeping in mind advanced industrial economies. The scarcity of research for studies of business cycles in India along with data limitations might be some of the reasons why policymakers in India are not too concerned about this issue. What are business cycles?

Business cycles are the short-run fluctuations in aggregate economic activity around its long-run growth path. What does a BCDC do? A BCDC maintains a chronology comprising alternating dates of peaks and troughs in economic activity. It analyses and compares the behaviour of key macroeconomic variables such as consumption, investment, unemployment, money supply, inflation, stock prices, etc.

Chapter 7. Business Cycles

Jeffrey Frankel If European countries used similar criteria to those used in the US for determining economic cycles, the Great Recession in many of them would quite possibly be considered an ongoing five-year slump. Such measurement issues may sound like a matter of minor technical details, but they can have significant real-world implications.

But it should not. The right question is not whether there have been double or triple dips; the question is whether there has been one big recession all along. As the British know all too well, their economy since the low point of mid has not yet climbed even halfway out of the post-crisis hole:

Official recession as declared that a conference call with its business cycle dating committee nber business cycle dating committee members. A trough in business cycle dating committee determined that the national bureau of economic research.

Bureau of Economic Analysis http: The low point in the unemployment rate usually occurs just before the peak. The high point usually occurs just after the trough. It appears that the increase in the unemployment rate is usually faster than the decline. In other words, the unemployment rate may surge upwards to a peak and then slowly fall back. This may be because hiring is more costly and time-consuming than firing, or that firms are reluctant to let go of staff until and then do so in a rush.

One interesting characteristic of the unemployment cycle is the change in the duration of unemployment. The Bureau of Labor Statistics categorizes how long people have been unemployed for:

December 2007: The Date the Recession (Officially) Began

Actual fluctuations in real GDP , however, are far from consistent. Measuring the Business Cycle Expansion is measured from the trough or bottom of the previous business cycle to the peak of the current cycle, while recession is measured from the peak to the trough. Committee members do this by looking at real GDP and other indicators including real income, employment, industrial production, and wholesale-retail sales.

Combining these measures with debt and market measures helps understand the causes of expansions. When they looked at the data, 10 measures hit lows in the period from June to December The recession began in December and lasted 18 months, making it the longest downturn recession since World War II.

These quasi-o¢cialdatesaretheoutcomeof discussions of theNBER’s Business Cycle Dating Committee, a group of highly respected academics who review a variety of economic indicators toform aqualitative judgment about the state of the economy.

Or worse yet, that Oregon falls first and recovers last? Something along these lines really does seem to be the conventional wisdom. In this case, the conventional wisdom is wrong. Today I want to focus just on employment, one of the only really good indicators available at the local level. First, a quick look at employment growth in recent decades. Clearly Oregon is more volatile than the U. We fall further in recession but grow quicker in expansion. In the good times we call this our traditional advantage.

Given that the economy spends many more years in expansion than in recession, Oregon comes out ahead over the full cycle. This next graph shows how Oregon fares over the entire cycle relative to the U. This is true today as well. Right now Oregon employment is 4.

Duracell International Inc.

In the ongoing discussions of economic news and information in the media, we often come across talk of recession and recovery in reference to the performance of the economy. What is a recession? And how do we know when one occurs? A Scarcity Of Money? The notion of recession in the business cycle has been recognised in one form or another since the formal development of modern economic theory in the late 18th century by Adam Smith.

the current recession could set a record, it will likely be only by a few months. 1The NBER is a not-for-profit corporation that sponsors economic research and promotes dialog on economic issues. By informal consensus, economists and policymakers accept the Business Cycle Dating Committee’s judgment on business cycle turning points.

During the recovery phase, the economy turns into a positive growth period with an increasing rate of growth. During the expansion period, the economy continues to grow, but gradually at a decreasing rate. After the peak is reached, the rate of growth will turn negative, causing the economic activity to decline and the economy to slip into recession. The recession phase is marked by a rapidly declining economy from its peak. The rate of decline slows down as the cycle approaches its trough and the economy passes through the contraction phase.

A severe contraction is referred to as a depression, the type that occurred in s. During the Great Depression , the output fell by almost 50 percent and employment by 22 percent. All the recessions since then have been shorter in duration and less severe. Considerable variability of the duration of business cycles has been observed in the past. Between and , there were 30 business cycles with an average length from trough to trough of 46 months and standard deviation of 16 months.

The average length of the expansion in these cycles was 27 months with a standard deviation of 11 months, and the average contraction was 19 months with a standard deviation of Though they varied greatly in duration and scope, all of them had some common features. They were national or international in scope; they affected output, employment, retail sales, construction, and other macroeconomic variables; and they lasted for years, with upward movement longer than downward movement.

Who Determines When We Are In A Recession?