Brooks Jackson: A primer on recession
(CNN) -- As the bad economic news pours out, economists of all stripes will be using the "R" word, saying we are in a recession. A recession is not yet official. That call won't be made for some time. But there is little doubt that for the first time in more than a decade, the U.S. economy has entered a true recession. Here's a primer:
What is a recession, really? The journalistic "rule of thumb" defines a recession as at least two consecutive quarters (six months) of "negative growth" -- an illiterate way of saying shrinkage -- in the gross domestic product. That's the Commerce Department's official measure of the dollar value of all goods and services produced by the U.S. economy.
Another definition, favored by comics with a morbid sense of humor, goes this way: "A recession is when my neighbor loses his job. A depression is when I lose my job."
However, the official definition is more complicated: "A recession is a period of significant decline in total output, income, employment and trade, usually lasting from six months to a year, and marked by widespread contractions in many sectors of the economy."
How will we know when it's official? We will be told by a group of economists examining flights of birds and goat entrails. (Just kidding about the birds and entrails -- they'll actually be examining printouts of government economic data.)
Who gets to decide when it's official? By general agreement among economists, the official designation is awarded by the Business Cycle Dating Committee of the National Bureau of Economic Research in Cambridge, Massachusetts, which has been around since 1920.
When will it be official? Maybe not for another six months or more. It takes a long time for economic data to be gathered, published and debated.
When was the last official recession? It lasted eight months, from July 1990 to March 1991. Here's the press release that said so.
Wait a minute! What about 1992?
Ah, you are confused by political rhetoric. During the 1992 presidential campaign, Democratic candidate Bill Clinton -- focusing like a laser beam on the battle cry, "It's the economy, stupid" -- hammered President Bush for failing to lead the nation out of recession. Pundits in turn excoriated Bush for suggesting that the economy already was turning around.
But Bush was right -- three days before Christmas 1992, the National Bureau of Economic Research finally issued its official proclamation that the recession had ended 21 months earlier. What became the longest boom in U.S. history actually began nearly two years before Clinton took office. It takes these economists a long time to make up their minds sometimes. In this case the recovery that started in March 1991 was so weak that it took much longer than usual to make the call.
So it could be more than a year before we know? More like six months to a year. But it's a fact that the last recession was over before the economists officially declared it had begun. That announcement came April 25, 1991.
How long will this recession be? Since 1945 the average "contraction," as the National Bureau of Economic Research calls them, has lasted 11 months. But they've grown shorter as we've learned more about how to manage business cycles. Before World War I, the average contraction lasted nearly two years.
Most economists are betting this one will be over by next spring. But that's assuming there are no more terrorist attacks to upset their calculations.
Check out the official dates for all cycles since 1854.
And for those going for extra credit on this subject, here's a memo from the head of the Business Cycle Dating Committee itself -- with charts and graphs.
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