Economic Perspectives with Hopeton Hay on KAZI 88.7 FM in Austin, TX

Recession Basics: Who Decides When A Recession Began & How It’s Defined

December 9, 2008

By Hopeton Hay

The National Bureau of Economic Research (NBER) announced that the U.S. has been in a recession since December of 2007. According to the NBER the last recession lasted from March 2001 to November 2001. With this recession 11 months old and counting, its the longest one we’ve had since the 16 month recession during the Reagan Administration which lasted from July 1981 – November of 1982.

Now that the official “spokesman” for recession has made this announcement some background information on NBER and how they define a recession is in order.

What is the National Bureau of Economic Research

NBER is a private, non-profit research organization founded in 1920 to promote a greater understanding of how the economy works. The Bureau’s associates focus on empirical research in the areas of statistical measurement, models of economic behavior, the effects of public policy on the U.S. economy, and the effects of alternative policy proposals. Sixteen of the 31 American Nobel prize winners in Economics have been researchers at NBER. It’s governed by a board of directors with representatives from major research universities such as Harvard and Stanford, and a representatives from major national economic organizations such as the American Economic Association and the AFL-CIO.

How Does NBER Define a Recession?

NBER defines a recession as a significant decline in economic activity spread across the economy lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches a trough.

The Bureau first began publishing the dates of business cycles in 1929. The NBER’s Business Cycle Dating Committee, formed in 1978, is responsible for declaring the beginning and end of recessions. The committee relies on a number of monthly economic indicators published by government agencies to maintain a monthly chronology of the business cycle.

Some of you may be wondering why it took so long for this announcement to be made. Yes there has been much speculation in the press that the U.S. is in a recession, but the Business Cycle Committee typically waits 6 to 18 months before declaring when a recession began so that the existence of a recession is not in doubt.

For more information on the NBER and the recession go to www.nber.org/cycles/recession.html.

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