By Jeanna Smialek. A recession begins when the economy reaches a peak of activity and ends when it reaches its trough. This downturn is the first since , when the last recession ended, and marks the end of the longest expansion — months — in records dating back to Most economists expect this recession to be both particularly deep and exceptionally short, perhaps just a few months, as states reopen and economic activity resumes. The National Bureau of Economic Research, a nonprofit group that tracks economic cycles in the United States, noted the unusual circumstances surrounding the slump in its announcement. Many economists believe the United States may already have exited the recession — or at least be on its way out. Robert Gordon, a Northwestern University economist and a member of the dating committee, said that he would bet a recovery started in April or May, meaning that the recession would most likely last for only a couple of months. The National Bureau of Economic Research formally dates business cycles based on a range of economic markers, importantly gross domestic product and employment.
U.S. economy entered recession in February, business cycle arbiter says
It analyses and compares the behaviour of key macroeconomic dates such as consumption, investment, unemployment, index supply, inflation, stock prices, etc. It identifies turning dates which act as a reference point for the construction of coincident, leading and lagging indicators of the economy. Timely identification of economic contraction and its severity allows dates to intervene, and thereby reduce its amplitude and duration.
NBER Business Cycle Dating Committee has determined that a peak in monthly US economic activity occurred in February , ending.
Burns and Wesley C. Mitchell, Measuring Business Cycles, remains definitive today. In essence, business cycles are marked by the alternation of the phases of expansion and contraction in aggregate economic activity, and the comovement among economic variables in each phase of the cycle. Aggregate economic activity is represented by not only real i. A popular misconception is that a recession is defined simply as two consecutive quarters of decline in real GDP.
Notably, the —61 and recessions did not include two successive quarterly declines in real GDP. A recession is actually a specific sort of vicious cycle, with cascading declines in output, employment, income, and sales that feed back into a further drop in output, spreading rapidly from industry to industry and region to region.
Business Cycle Council
Such a committee would not only strengthen the economy’s information base, it would bring greater clarity on the impact of employment during and after a growth recession. A recent slowdown in GDP has triggered talk of whether the Indian economy faces a possible growth recession. The conventional definition of a recession, which economists use, is two or more quarters of declining real GDP. But have you wondered how a macroeconomist identifies the trough or peaks in a business cycle or obtains the period of recession or expansion in an economy?
This algorithm follows certain rules — for instance, a peak is always followed by a trough and vice-versa.
(called the trough of the business cycle) is determined by the Business Cycle Dating Committee of the NBER. The diagram of a hypothetical business cycle.
The recession is confirmed. The National Bureau of Economic Research reports ,. The committee has determined that a peak in monthly economic activity occurred in the U. The peak marks the end of the expansion that began in June and the beginning of a recession. The expansion lasted months, the longest in the history of U. The previous record was held by the business expansion that lasted for months from March to March The committee recognizes that the pandemic and the public health response have resulted in a downturn with different characteristics and dynamics than prior recessions.
Nonetheless, it concluded that the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions. The Associated Press reports ,. Most economists expect this recession to be both particularly deep and exceptionally short, perhaps just a few months, as states reopen and economic activity resumes.
Robert Gordon, a Northwestern University economist and a member of the dating committee, said that he would bet a recovery started in April or May, meaning that the recession would likely last for only a couple of months. The Associated Press reports , Most economists expect this recession to be both particularly deep and exceptionally short, perhaps just a few months, as states reopen and economic activity resumes.
Economists contacted by AP suggest the nation may already be climbing out the recession.
Cepr business cycle dating committee
A recession begins just after the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is formally in an expansion; between peak and trough it is in a recession. In both cases, growth rates may be very low. To reduce the chance that data revisions might lead the Committee to reconsider its choice of turning points in the future, the Committee examines a wide array of economic data in addition to GDP, such as the individual components of output and labor market data.
The NBER’s seven-member Business Cycle Dating Committee examines monthly economic indicators that provide a good industry-wide economic perspective.
Reuters – The U. The designation was expected, but notable for its speed, coming a mere four months after the recession began. The committee has typically waited longer before making a recession call in order to be sure. When the economy started declining in late , for example, the group did not pinpoint the start of the recession until a year later. The unemployment rate rose from a record low of 3.
But growth may well recover from there, possibly making the current downturn not only among the sharpest but also among the shortest on record. Since World War Two recessions have lasted from six to 18 months, nothing close to the month downturn of the Great Depression that began in Though the data that began to accumulate in March rival some of the statistics from the Depression era, economists expect growth to resume this summer and likely continue unless the virus resurges.
The NBER’s Business Cycle Dating Procedure
But we already knew that we were in a recession that had likely begun around that date. So, why does the NBER’s formal declaration matter? It is no secret that measures of employment fell sharply from February to March. Real inflation-adjusted personal consumption expenditure PCE and real personal income before transfers both peaked in February as well. Official measures of GDP are released only quarterly, but the economic free-fall in late March was enough to pull first-quarter GDP growth down to an annualised rate of
CEPR CEPR Business Cycle Dating Committee. Philippe Weil, Domenico Giannone, Refet Gürkaynak, Monika Merz, Richard Portes, Lucrezia Reichlin, Albrecht.
In this study, we review the growing marketing literature on how to attenuate or amplify the impact of BC fluctuations. Our discussion focuses on three key aspects: 1 the scope of, and insights from, existing BC research in marketing, 2 advancements in the methods to study various BC phenomena in marketing, and 3 some emerging trends that offer new challenges and opportunities for future BC research in marketing.
Marketing research has long overlooked the impact of business cycle BC fluctuations. An often-used definition of BCs goes back to the classic study of Burns and Mitchell , p. Importantly, these cycles are visible across multiple aggregate economic series such as real Gross Domestic Product GDP , real income, or employment, among others Stock and Watson For the U. This identification of peaks and troughs is judgmental, and open to debate.
Other researchers have put forward specific rules for defining a recession based on economic aggregates. A popular definition often attributed to a New York Times article by Shiskin, for example, characterizes a recession as two or more consecutive quarters of negative GDP growth. This definition has been applied in marketing studies by, among others, Kamakura and Du and Sethuraman et al.
BCs have traditionally received ample attention in the economic literature, and many of the definitions and operationalizations have not surprisingly originated from that field. Reckitt put this down to its proactive marketing strategy to persuade its customers to still pay for its more expensive branded products, even when times got tough. Reckitt Benckiser is not unique. Meanwhile, about one-fifth of all leading firms—those in the top quartile in their industry based on financial performance—fell to the bottom quartile in the economic downturn The Wall Street Journal
The need for a business cycle dating committee
How does the Committee Define a Business Cycle? See Methodology. What data does the Committee use? See Data Sources. How is the Committee’s membership determined? The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP.
“The committee has determined that a peak in monthly economic activity of Economic Research’s Business Cycle Dating Committee said in a.
A business cycle dating committee will strengthen the reserve base for the economy and help gauge its changing nature. It has been a quarter of a century since India explained the journey of opening its economy to the world. But the idea of a business cycle dating committee BCDC for India has not received sufficient attention.
Most of the research in business cycles is done keeping in mind advanced new economies. The scarcity of research for studies of business cycles in India along with data limitations might be some of the reasons why policymakers in India are not too concerned about this issue. Business cycles are the short-run fluctuations in aggregate economic activity around its long-run growth path.