This morning, Thom Keene was discussing the possibility of a slowdown, zero growth, or a contraction. He specifically asking Citigroup’s Global Chief Economist: “Are we going to approach an NBER recession?”
Her answer: “Well, of course, the NBER recession is the two consecutive quarters of negative growth, thats the official word.”
That is not the NBER definition (we shall get to that in a moment). As far as I can recall, it has not been the official definition of a recession during the entire course of my professional career dating back to the 1990s. I am always surprised that so many people get this wrong, but perhaps I shouldn’t be.
I traced an early mention of the unofficial “2Q” definition to Julius Shiskin, who was the ninth Commissioner of the U.S. Bureau of Labor Statistics. In a 1974 Op-Ed in the New York Times, Shiskin suggested two quarters of contraction might be a worthwhile rule of thumb:
“A rough translation of the bureau’s qualitative, definition of a recession into a quantitative one, that almost anyone can use, might run like this: In terms of duration—declines in real G.N.P. for 2 consecutive quarters; a decline in industrial production over a six‐month period. In terms of depth—A 1.5 per cent decline in real G.N.P.; a 15 per cent decline nonagricultural employment; a two point rise in unemployment to a level of at least 6 per cent. In terms of diffusion—A decline in nonagricultural employment in more than 75 per cent of industries, as measured over six‐month spans, for 6 months or longer.” *