Thursday, July 28, 2022

How to track the 6 indicators that NBER uses to date recessions

I saw the link to the graph I use below posted on Twitter by economist Jeremy Horpedahl.

NBER stands for National Bureau of Economic Research. The controversy the last few days is over the definition of a recession.

One that is often used is two straight quarters of falling real GDP. 

Another one that people are talking about is:

"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."

See Business Cycle Dating Procedure: Frequently Asked Questions. The NBER is a private organization, not part of the federal government.

Economist Phil Magness has written an article that mentions that the 2 quarter definition has been in text books and is even mentioned in laws. See A Recession by Any Other Name: An economic downturn is a political problem, so the White House is playing semantics by redefining the term

Magness mentions that the 2 quarter definition "describes almost every downturn since World War II."

Below is the graph with the NBER's indicators from FRED (Federal Reserve Economic Data). Click here to go to the site.

It looks like all of them are pretty flat. Some look like they are going down but no major declines. After the graph I list the definitions of the 3 of the indicators (the definitions at the links give more details). The others are pretty much self explanatory. But again, more info at the link.


Industrial Production: Total Index  (INDPRO) The Industrial Production Index (INDPRO) is an economic indicator that measures real output for all facilities located in the United States manufacturing, mining, and electric, and gas utilities (excluding those in U.S. territories). 

Employment Level The civilian noninstitutional population is defined as: persons 16 years of age and older residing in the 50 states and the District of Columbia, who are not inmates of institutions (e.g., penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.

All Employees, Total Nonfarm, commonly known as Total Nonfarm Payroll, is a measure of the number of U.S. workers in the economy that excludes proprietors, private household employees, unpaid volunteers, farm employees, and the unincorporated self-employed. This measure accounts for approximately 80 percent of the workers who contribute to Gross Domestic Product (GDP).  

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