It’s Official: U.S. Recession is Now One-Year Old

The National Bureau of Economic Research said Monday afternoon that the U.S. has been in a recession since December 2007; the group is the official body for dating the nation’s recessionary cycles, making Monday’s announcement the first official pronouncement of recession since economic indicators first suggested contraction twelve months ago. The business cycle dating committee of the NBER consists of leading economists who maintain a chronology of the business cycle. The committee met by conference call on Friday and determined that a peak of economic activity in the U.S. had occurred in Dec. 2007. That peak “marks the end of the expansion that began in November 2001 and the beginning of a recession,” the committee said in Monday’s press release. A recession is defined by the committee as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough; because a recession is a broad contraction of the economy, not confined to one sector, the committee explained, they emphasize economy-wide measures of economic activity. The committee believes that domestic production and employment, however, are the primary conceptual measures of economic activity. “The committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment,” said the group. “This series reached a peak in December 2007 and has declined every month since then.” Employers have cut payrolls by 1.2 million jobs in the first 10 months of this year, according to a Yahoo Finance Report. Economists are predicting the government will report Friday a loss of another 325,000 jobs for November. Investors were confronted with more grim economic data Monday morning, with an index of manufacturing activity posting its fastest pace of decline in 27 years and construction spending posting a larger-than-expected decline, as even non-residential construction began to show signs of weakening activity. See earlier report. More than a few economists and well-known financial writers have argued that the U.S. has been in a recession since Dec. 2007 — including, notably, the Calculated Risk blog — making today’s announcement validation to some degree. The U.S. has had nine previous episodes of recession comingled with bear stock markets, according to Leon LaBrecque, managing partner and founder of LJPR, LLC, a Michigan-based firm managing over $300 million in assets. LaBreque told HW he believes the U.S. is halfway through the current cycle, citing the average 23-month length of previous similar cycles. Write to Kelly Curran at kelly.curran@housingwire.com.