The Latest Data: Yes, It’s a Recession

There has been a lot of hand-wringing about whether or not the U.S. economy is currently in a recession. This morning’s data will, I think, lead to a near-unanimous view that the U.S. economy is in a recession. Not only was employment growth in February negative, but the B.L.S. also tells us that the previous two months were worse than originally thought. Over the past three months, non-farm payrolls fell at an annualized rate of about 0.1 percent.

As the chart below shows, in virtually every instance in which payrolls fell over a 3-month period, the NBER business cycle dating committee declared the U.S. economy to be in recession. Indeed, the only exceptions to this rule occurred over 50 years ago.

A few more thoughts:

1) The only thing to save us now: these are preliminary data, and a big upward revision could give a different view. But given the run of other recent economic data, it seems pretty darn clear that the macroeconomy is currently pretty grim.

2) What the politicos will say: given where we are in the political cycle, expect some commentators to point instead to the survey-based measure of the labor market. These data are based on a survey of workers rather than firms, and tend to yield noisier estimates. And when numbers can jump around a lot, it gives plenty of scope for political operatives to choose the specific numbers that support the particular story they are trying to tell. Even so, there’s not a lot of good news in the survey data.

3) What many macroeconomists will be pondering: does this second recent recession challenge the view that we are in the midst of a “great moderation,” in which the business cycle has been tamed?

4) The chances of a recession, according to, have risen to somewhere around 60 percent. But these traders are predicting the chances of two consecutive quarters of negative GDP growth, rather than the decisions of the NBER business cycle dating committee. The latter seems much more likely than the former (although both are likely).

Further commentary: Paul Krugman writes, “It has begun“; Brad DeLong warns against “a natural human tendency to overreact to what is, after all, only a marginal data point,” but goes on to say that “it is time for words like `alarm’ and `grave concern,’” a message consistent with this roundup of other commentary.

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  1. Ashlie says:

    I’m pretty sure no one is too surprised by this data. For the average Joe, it won’t have grave consequences. I, myself average, am a *bit* worried however. I work in the airline industry which does not take kindly to recessions. We’ll see how the belt tightening affects us…


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  2. Pierre Lehu says:

    For the average Joe, which is worse, recession or stagflation? I vote stagflation, especially because inflation is a lot higher in real terms than government reports because food and energy are not included and food and energy are necessities that we can’t really cut back on that are going through the roof. And so whether or not we’re in a recession, we’re definitely in a stagflation, since there’s no doubt that economy is stagnant and inflation is getting to be a big problem for most people.

    And what good would another rate cut do if every time we cut our rates, the dollar goes down and so the price of oil, which is quoted in dollars, goes up? At this point it’s pretty much a zero point game.

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  3. bwise says:

    Duh — The recession for the average American began long ago. I suggest that the brilliant economists examine these trends caused by eight years of Republican rule and neglect:

    1. In Oregon and probably in other states and the nation 97 percent of the net income growth went to the top 2 percent of income earners in the last five years.
    2. Dollar denominated assets continue to fall as the U.S. enters the Portugal scenario of gradual economic decline.
    3. The Euro will become the currency of global as the dollar continues to slide.
    4. Enormous consumer, trade and government debts compound negative interest and make us vulnerable to our creditors.
    5. Oil and natural gas supplies decline in their availability while prices creep up to where? And an energy policy focused on Alaska’s tiny amount of crude….
    7. A two-three trillion cost to the Iraq war — all financed by federal debt.
    8. A perfect storm of baby boom retirements, unfunded pension liabilities, inadequate funding for social security and Medicare.
    9. Oh I forgot the housing crisis – another decline in the assets of the average American.
    9. Now — stagflation, disinvestment, and the decline of America.

    So we want Bush III – John McCain — right?

    I am investing in the Middle East, Africa, and Brazil…

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  4. George says:

    Conservatives, because the are in power, are telling us that there is no recession. It reminds me of the Iraqi government officials who, during the fall of Baghdad, claimed there were no Americans in Baghdad as our tanks rolled behind them.

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  5. Geoffrey Henny says:

    I do not consider myself a prescient forecaster, but if you believe in long cycles like the Kondratief, then we are overdue by quite a bit for a depression. I know it has been argued that such unmentionables are not part of the post Keynesian world but I have my doubts. Remember the ‘Great Depression’ was not recognized at the time it began to happen. My generation (baby boomer) has been living it up like the roaring 20′s for quite awhile now with scant consideration for the fundamentals of sensible
    prudential economic behavior and sacrifice for the next generation. While I don’t know whether we are going to experience a real meltdown, my guess is we are about to be presented with the bill for our years of fun and self indulgence. Maybe the laws of economics have been changed by the knowledge economy but I suspect not.

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  6. FGGreene says:

    Hmmmm…8 of the 10 recessions on the chart occurred during Republican administrations. I wonder if what that says about the effectiveness of Republican economic policy.

    Republican rhetoric seems always to try to take credit for the good economic times during Democratic administrations while denying any blame for the lousy times during their own.

    We should have realized by now that for all their “pro-market” rhetoric, Republicans just don’t know how to run an economy.

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  7. Sam says:

    In addition to the comments above, Our beloved president is issuing a $300 -$1,200 credit to almost each and every citizen. Will these citizens be spending that money once it is received? Of course not! This money will be immediately spent on paying down debt.

    A wise president would have started a number of public works projects that would be repairing our failing infrastructure. This would put money in the hands of the unemployed, while guaranteeing that the US got something for its money.

    This current plan will yield nothing but additional money for the credit companies

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  8. Michael Tashman says:

    I’m confused. From the graph it appears that every other NBER-declared recession was accompanied by a fall in nonfarm payrolls of at least 2% (and many greater than that). The current drop is 0.1%. While it is certainly significant that this is the first time jobs have decreased since the last recession in ’02, isn’t it also an important difference that — as of yet — that decrease is at least 20 times smaller, proportionally, than other recession payroll drops?

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