Originally published Wednesday, February 13, 2008 at 12:00 AM
Analysis
How to call a recession
More economists think we're in a recession or on the verge of one. Yet the definition is vague: "A recession is a significant decline in...
The Associated Press
More economists think we're in a recession or on the verge of one. Yet the definition is vague:
"A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income and wholesale-retail trade."
That's according to the National Bureau of Economic Research (NEBR). When most analysts discuss stock performance during recessions — Citi Investment Research, for example, says the S&P 500 has dropped an average of 25.6 percent from its peak before a recession to its trough — they are using dates set by NBER.
The trouble is, this private, nonprofit group declares when recessions begin and end only after the fact. It didn't call the most recent recession, which began in March 2001, until November of that year. By then, the recession was already ending, though NBER wouldn't declare that until 2003.
Though many observers define a recession as two consecutive quarters of contraction in the economy, NBER takes a broader view. It says growth is "the single best measure" of economic health but looks at the depth of a contraction, not just the duration.
"It's more accurate to say that a recession — the way we use the word — is a period of diminishing activity rather than diminished activity," NBER says. The group also studies income and employment trends, which cover activity across the entire economy.
Copyright © 2008 The Seattle Times Company
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