Tag Archives: NBER

10.29.2012 | Election Economics: Comparing Economic Recoveries

Illustrated by this graph from the Minneapolis Federal Reserve, sometimes one orange line can create a huge debate.

The thick orange line representing the US recovery from the December 2007-June 2009 recession reflects a tepid ascent next to curves that represent other post-WW II economic recoveries. Still though, Democrats say the numbers reflect progress while Republicans call them poor. How can we decide?

Looking at several academic papers, it gets ever more confusing. Some policy makers and scholars believe that the recovery is typical. Explaining that it takes a long time to bounce back from a recession connected to a financial crisis, they say the trajectory of this recovery is what we should expect. Disagreeing, other equally auspicious individuals use their data to prove that financially related deep recessions actually precede robust economic growth.

The disagreement takes us to the data. Should the US be compared to other culturally and institutionally different countries or should the data just focus on US economic history? Is is more valid to look at how how long it takes to return to pre-crisis output levels or how fast the economy grows during its recovery? Do we look at per capita or overall figures?

If you would select the first half of each question in the previous paragraph, then the recently announced 2% growth rate for the 3rd quarter of 2012 is progress. If, on the other hand, your preference is the second choice, you can say that current numbers should be better. And as you can see, Obama likes the former and Romney the latter.

A Final Fact: Just 2 definitions today.

A recession: Technically, a recession is a decline in real GDP for 2 successive quarters. The people who decide the dates of recessions, the NBER (National Bureau of Economic Research), say that they take into consideration additional variables including real income, employment and industrial production.
GDP: Most simply stated, the Gross Domestic Product is the total dollar value of the goods and services produced in a country during a specific time period.

Sources and Resources: Replete with data and ideas about financial crises, recessions, and recoveries, Kenneth Rogoff’s and Carmen Reinhart’s 2009 book and their paper, “This Time Is Different,” say that recoveries from systemic financial crises take a long time. Much more briefly, in his blog, John Taylor disagrees with the Rogoff/Reinhart approach as do Michael Bordo and Joseph Haubrich in this Cleveland Federal Reserve paper. Also, you might enjoy manipulating the interactive graphs from the Minneapolis Fed. Finally, here and here is the actually debate unfolding with Carmen Reinhart and Kenneth Rogoff on one side and John Taylor and Michael Bordo on the other.

Election Economics Topics:

Posted by: adminEcon
Tags: 2% GDP growth, Barack Obama, Carmen Reinhart, John B. Taylor, Kenneth Rogoff, Michael Bordo, Minneapolis Federal Reserve, Mitt Romney, NBER, recession, recovery, This Time It's Different, US economic growth
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03.18.2012 | Unusual Economic Indicators

If you see women in long skirts at “sit-down” restaurants, then the economy is probably expanding.

Since 1926 when the hemline index was first expressed, economists have assumed that hemlines fall if the economy contracts and rise during prosperity. However, when economists at Erasmus University looked at fashion magazines and business cycle data from the NBER between 1921 and 2009, their conclusions were not exactly what everyone expected.

They identified a delayed connection between skirt length and the economy. 3 to 4 years after the GDP rises, then hemlines go up. And, if the economy slumps, it takes 3 to 4 years for skirt lengths to drop. Reminding us that the recent recession ended in 2009, one CNBC reporter says we should not worry about longer dresses at 2012 Fashion Week.

Financial journalist Floyd Norris was also upbeat. Because his “Where You Eat Index” for 1994-2012 shows that GDP and “sit down” restaurant attendance rise together, the January 2011 to January 2012 increase in “full service” restaurant business was good news.

Our bottom line? To assess the economy, you can look at we wear and where we eat.

Here, econlife looks at other uncommon economic indicators.

The Economic Lesson

Economic indicators can be categorized as leading, coincidental or lagging. Stock markets, reflecting investors’ perception of future profits, are leading indicators, the GDP, telling the current state of the economy, is coincidental, and the unemployment rate is a lagging indicator.

An Economic Question: Thinking of the recession that lasted from December, 2007 to June, 2009, which daily life economic indicators have you observed?

Posted by: adminEcon
Tags: business cycles, GDP, hemline index, NBER, recession, unemployment, unexpected economic indicators
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09.21.2010 | It’s Official

We now know when the recession officially ended. But I still wonder whether we are moving along a “V”, a “U”, a “W” or an “L”.

According to the National Bureau of Economic Research (NBER), the recession began during December, 2007 and ended June, 2009. 18 months, this recession was the longest since WW II. The 1973-75 and 1981-82 recessions lasted 16 months with the 1981-82 recession a part of a “W” which we could call a double dip. Lasting 8 months, the 2001 recession was the same length as the 1990-91 contraction.

I thought it would be interesting to see the connection between (selected) recession years and politics. 1920: switch from incumbent Democrats to Republican Warren G. Harding; 1932: Herbert Hoover loses to Franklin Roosevelt; 1948: incumbent Harry Truman wins; 1980: Ronald Reagan beats Jimmy Carter; 1992 (after 1990-’91 recession): Bill Clinton defeats George H. W. Bush. (“It’s the economy, stupid.” was posted in Bill Clinton’s campaign headquarters as a reminder of their winning message.)

The Economic Lesson

The traditional definition of a recession is 2 consecutive quarters of a shrinking GDP. The NBER, though, uses additional variables such as “aggregate hours of work” and other production and employment data to identify the length of a recession. The 2001 recession, for example, did not have 2 consecutive quarterly GDP declines.

The path of a business cycle moves through an expansion, peak, contraction, and trough. As a result, during December, 2007, we experienced the peak of the previous business cycle and the beginning of a contraction. We now know that the trough, the very bottom of the current cycle, took place during June, 2009. Since then, we have been expandng. With a sluggish expansion, I guess we can eliminate the “V”.

Posted by: adminEcon
Tags: business cycle, NBER, recession
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04.14.2010 | Is It Over?

Imagine a “u” attached to a slightly (or considerably) higher upside down “u” and you are looking at 2 business cycles. A business cycle includes a peak, a contraction, a trough, and an expansion. Most people think that this recession started during December, 2007 (the top of the first “u”) and ended during July, 2009 (the bottom of the first “u”). However, the definitive word will come from the National Bureau of Economic Research (NBER) and they are not quite sure yet.

The NBER tells us when recessions start and when they end. While primarily, they base their decision on the GDP, other data is considered:

Real GDP: the dollar value of goods and services produced in the U.S.; measured quarterly by the Bureau of Economic Analysis (BEA).
Real Personal Income: the amount we earn excluding transfer payments (such as social security, welfare, and other government paychecks that do not pay for a good or service); measured monthly.
Employment: the percent of the labor force that is unemployed and looking for a job; measured monthly.
Industrial Production: manufacturing production; measured monthly.
Sales volume: from manufacturers and retailers; measured monthly.

The Economic Lesson

A recession is the period between a peak and a trough. Thinking back to our “u”, it is the left side, the trip downward. In economic terms, as we travel down the left side of the “u”, the GDP is either growing more slowly or actually diminishing. While most of us say that a recession is defined as two consecutive quarters of declining GDP, the NBER says that the quarters do not have to be next to each other.

Posted by: adminEcon
Tags: GDP, NBER, recession, trough
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