The recession began in February
EDITOR'S NOTE
I was definitely not expecting to see the NBER declare a recession this quickly.
The group is the official arbiter of U.S. expansions and downturns even though it has no affiliation with the government. Its credibility comes from its independence, its impressive roster of economists over the decades, and its legacy--it turns 100 this year. The NBER--the National Bureau of Economic Research--is probably best-known for its weekly list of working papers from its affiliated researchers, which often get picked up on "fintwit" and occasionally in the press, as with this recent piece on how public disclosure of Covid-19 is more effective than lockdowns.
Technically, it's the NBER's Business Cycle Dating Committee that determines the start and end dates of, yes, business cycles, and hence recessions. It has eight current members, including the Romers (you can read more here). One of them, James Poterba, is also the current president of the NBER, and he'll be joining us on The Exchange today.
The group typically moves at a glacial pace in its declarations, since it doesn't want to get it wrong. It's rarely, if ever, issued corrections. This can be annoying in real time when, as during the '08-'09 financial crisis, people had to keep hedging by saying the U.S. was "most likely" or "almost certainly" in recession until we got confirmation from the NBER a full year later.
So I was pretty shocked to see the group come out so quickly with its recession call this time around. Yesterday, they declared that the longest-ever U.S. economic expansion (since records began in 1854) peaked and ended in February, which is when the recession began. Then again, the evidence was pretty clear.
All the NBER needs is to know for sure the month that broad economic indicators--especially employment and production--began contracting. The one somewhat curious thing to me, which I'll ask Mr. Poterba about, is that the U.S. still added jobs in February and jobless claims didn't start surging until early March, when the shutdowns began. But Goldman and others have said their data trackers show GDP started declining in February, perhaps because China's massive lockdown was dragging on global growth.
What about the whole two-consecutive-quarters-of-negative-GDP to qualify as a recession? That's always been more of a rule of thumb than a hard-and-fast rule. Will this recession even last six months? If not, it would be the briefest--and probably deepest--ever.
The recession ends when the economy stops contracting further, as the NBER noted in September 2010 when it declared the last recession had ended in June of 2009. Most economists have GDP shrinking sharply in the April through June quarter and rebounding from July on. The stock market led the macro turnaround by roughly four months back in 2009, which would also imply a July recovery this time around, for a roughly six-month-long recession.
If it turns out to be even shorter than that, it's already over.
See you at 1 p.m!
Kelly
P.S. At noon ET today, Brian Sullivan is hosting a CNBC Pro event on the oil market which, given all the news lately (Chesapeake was halted for trading today amid rumors its bankruptcy is imminent), could be worth your time. Register here.
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