Jobs data, GDP stoke debate over recession

While housing prices show little sign of a bottom, the sharp drop in housing construction and sales may soon begin to level off. And the other major drag on the economy — the surge in oil prices — has recently reversed course.

“If you get a big enough drop in oil, that could keep the consumer going and revive the auto market,” said Wyss.

One widely accepted recession definition requires at least two consecutive quarters of declining GDP: The total dollar volume of goods and services falls from one quarter to the next.

But for the “official” dates of a recession, economists generally defer to the National Bureau of Economic Research, a private group that has tracked the ups and downs of the U.S. economy back to 1854. The final call for the start and end of a recession falls to the six private economists who make up the NBER’s Business Cycle Dating Committee.

The committee looks at a variety of data beyond GDP, including employment, industrial production, personal income, manufacturing and retail sales. It’s not unusual for those indicators to point in different directions, according to Jeffrey Frankel, a Harvard economist and a member of the NBER’s recession dating committee.

“If you just looked at the jobs number since January, they’ve been down and that’s clearly the sign of a recession,” he said. “If we end up declaring a recession, it’s still possible that we would date it back to January for that reason because, other than GDP, employment is the second-most important series we look at.”

It’s not the first time the economy has posted gains in the total volume of goods and services produced and still seen other indicators point to a recession. In the 1970s, economists first began using the term “growth recession” to apply to a period where the economy slows sharply and begins flashing signs of a recession without actually moving in reverse. So far, that’s a rough description of current conditions.

Like a lot of economics, pegging the start and end of a recession is not an exact science. Not all economists agree with the NBER’s official pronouncements. Frankel says there was a fair amount of second-guessing and criticism about dates assigned to the last recession, which the committee fixed at November 2001. Because the unemployment rate continued to rise and didn’t peak until June 2003, some economists labeled that period a “jobless recovery,” a phenomenon not unlike the current “growth recession.”

While the debate continues about whether the economy has slipped into a recession or not, the NBER’s dating committee is in no rush to jump into the fray. Frankel says the public often has a hard time understanding why the NBER takes so long to make its official pronouncements.

“When do we finally make a declaration it's always, ‘Well, duh — you’re just telling us what we’ve known for a long time.’ And we’re used to that,” he said. “The point is that unlike everyone else — the pundits and forecasters and commentators who want to be early and declare something before other people — our goal is to be definitive and to not be in a position where we have to change our minds if the statistics get revised the next go around."

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