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What’s in a Recession?

After months of plummeting output and employment, the National Bureau of Economic Research has determined its official start date for the current recession in the United States. Far from being late to the disaster, the NBER is early by its usual standards – and has provided the most definitive ruling one can hope for.

CAMBRIDGE – On June 8, the Business Cycle Dating Committee of the National Bureau of Economic Research declared that economic activity in the United States had peaked in February 2020, formally marking the start of a recession. 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 annualized rate of -4.8% (relative to the last quarter of 2019).

Though the NBER is a private non-profit research institution, its chronology holds official status, as affirmed by the US Department of Commerce’s Bureau of Economic Analysis (BEA). And every time its Business Cycle Dating Committee declares a turning point for the US economy, people wonder what took it so long. But the four-month lag between the event and the committee’s latest declaration was the shortest since its founding in 1978. For the US economy’s ten cyclical turning points since 1980, the average time lag had been 11.7 months. The committee’s relative speediness this time is a testament to the unprecedented suddenness of the pandemic-induced collapse.