Is The Covid-19 Recession Over? A Comparison To The Great Recession

 

As measured by GDP, the Covid-19 recession will soon be over assuming it isn't already. But that is not the deciding measure.

GDP Will Hit a New High Next Quarter

Real GDP is poised to hit a new high next quarter. 

Is that a sufficient?

GDP Three Ways

Real GDP Percent Changes Three Ways 2021 Q1 Preliminary

GDP Reporting Confusion

Reporting adds to the GDP confusion. Economists like to present GDP at a Seasonally-Adjusted Annualized Rate (SAAR). 

In the first quarter of 2021 GDP was up a reported 6.4% annualized. Actually, quarter-over-quarter GDP was up 1.6%. 

From the above chart one would be hard pressed to know the numbers I presented in the lead chart.

The 33.4% rise did not come close to wiping out the 31.4% decline.

It takes a 45.8% rise to wipe out a 31.4% decline.

GDP did not really fall 31.4% in the first place. It fell 9.0% but that was the biggest decline in the history of the data.

Official Arbiter of Recessions

The National Bureau of Economic Research NBER is the official arbiter of recession starts and ends.

Criteria is Flexible

The traditional role of the committee is to maintain a monthly chronology of business cycle turning points. Because the BEA figures for real GDP and real GDI are only available quarterly, the committee considers a variety of monthly indicators to determine the months of peaks and troughs. It places particular emphasis on two monthly measures of activity across the entire economy: (1) personal income less transfer payments, in real terms, which is a monthly measure that includes much of the income included in real GDI; and (2) payroll employment from the BLS. 

Although these indicators are the most important measures considered by the committee in developing its monthly business cycle chronology, it does not hesitate to consider other indicators, such as real personal consumption expenditures, industrial production, initial claims for unemployment insurance, wholesale-retail sales adjusted for price changes, and household employment, as it deems valuable. There is no fixed rule about which other measures contribute information to the process or how they are weighted in the committee's decisions.

The committee's approach to determining the dates of turning points is retrospective. It waits until sufficient data are available to avoid the need for major revisions. 

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