US Recession Likely Started in March 2020
Is a US recession underway?
The US recession has likely started according to Former Federal Reserve vice chairman Alan Blinder. Blinder was on CNBC this morning and stated the obvious, placing 90% odds that it is now underway.
Blinder also made clear that he finds the responsiveness of the Trump administration in both human suffering terms and economic terms woefully inadequate, adding “Nobody read ‘The Boy Who Cried Wolf’ to President Trump three years ago. Sadly, we’re in a position where are after so much lying, who in the country believes what he says?”
While most laypeople define US recession as being two consecutive quarters of negative GDP, this is just not the case. Requiring two back-to-back negative quarters of GDP is simply a cute way governments, stock pumpers, etc., skirt around the reality of a severe slump being, you know, a recession.
In the United States, the National Bureau of Economic Research (NBER), is the official and independent arbiter of US recession dating. In the US recession is thus defined, appropriately, as: “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”
NBER continues explaining their method of dating US recession
The committee places particular emphasis on two monthly measures of activity across the entire economy: (1) personal income less transfer payments, in real terms and (2) employment. In addition, we refer to two indicators with coverage primarily of manufacturing and goods: (3) industrial production and (4) the volume of sales of the manufacturing and wholesale-retail sectors adjusted for price changes. We also look at monthly estimates of real GDP such as those prepared by Macroeconomic Advisers (see http://www.macroadvisers.com). Although these indicators are the most important measures considered by the NBER in developing its business cycle chronology, there is no fixed rule about which other measures contribute information to the process.
Obviously the implications of an official US recession declaration are huge. However, NBER typically does not issue their official call of until well into the US recession in question. In fact, a US recession may even be over by the time the dating committee releases its finding.
“I wouldn’t be one bit surprised if when we look back at the data, it is decided … that the recession started in March,” Blinder, a former Federal Reserve vice chairman and now a professor at Princeton, told CNBC’s “Squawk Alley.” “We won’t know that. It takes months to get the data that would be relevant to a call like that. But it wouldn’t be a bit surprising to me.”
While a recession is often defined as two consecutive quarters of negative economic growth, there are other measures, such as dramatic changes in the unemployment rate, that also are considered. Ultimately, the National Bureau of Economic Research is the arbiter. The Great Recession was deemed to have started in December 2007, but the NBER didn’t declare it until a year later.