Category Archives: recession

Defining recessions when negative growth is too common or too rare

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June 20, 2020 — This post follows up on “What Determines When a Recession is Recession?” which pointed out some drawbacks of defining a recession by two negative quarters of growth.

In some countries there is another, more fundamental, basis for questioning the two-quarter rule for determining recession, or any GDP-based rule. Some countries experience sharp slowdowns or periods of diminished economic activity and yet their long-term trend growth rates are either so high or so low that the negative-growth rule does not capture what is needed to describe the cyclical state of the economy. For such countries, the problem is that perhaps there is nothing special about the number zero.  This is particularly true for the global economy considered as a whole. read more

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What Determines when a Recession is a Recession?

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June 18, 2020 — The Business Cycle Dating Committee of the National Bureau of Economic Research declared on June 9 that US economic activity had peaked in February 2020, formally marking the start of the recession.

We all knew about the recession already and even the likely date when it started.  Looking at the numbers gave the same answer as “looking out the window.”  Measures of employment had fallen sharply from February to March.  Real personal consumption expenditures (PCE) and real personal income less transfers (which are  numbers that the NBER Committee looks at) both peaked sharply in February as well.  Official measures of GDP only exist on a quarterly basis; but the economic freefall in late March was enough to pull first-quarter GDP growth down to an annual rate of -4.8 %  (relative to the last quarter of 2019). Why did the NBER wait until now to declare something that had already been so clear? read more

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Risk of Rapid Re-opening

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May 11, 2020 — This interview by Associated Press is the basis of quotes in a story today: “Risk of reopening US economy too fast: A W-shaped recovery.”

  1. AP: To what extent is the push to reopen the economy making a W-shaped recovery more likely?

JF: I believe that the push to reopen the economy is making a W-shaped recovery very much more likely.

  1. AP: What should we be doing to produce the best economic outcome?

JF: Widespread reopening should wait for certain conditions to be met.  The conditions include:

  • a sustained decline in mortality rates (not just the attainment of a peak);
  • the easy availability of frequent testing (in reality, not just as a White House claim);
  • and perhaps ultimately the discovery and testing of a vaccine and/or treatment (which will take time).
  1. AP: At this point what type of recovery do you see as most likely?

JF: Unfortunately, I would guess that a W-shaped pattern is the most likely, as premature withdrawal of government measures leads to relapses in health of the population and health of the economy. read more

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