The differences between these two sets of estimates were particularly evident in the recessions of 20-2009.Q: How does the committee weight employment in determining the dates of peaks and troughs? In the 2007-2009 recession, the central indicators–real GDP and real GDI–gave mixed signals about the peak date and a clear signal about the trough date.
First, we do not identify economic activity solely with real GDP and real GDI, but use a range of other indicators as well.Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology.Third, we consider the depth of the decline in economic activity.Recall that our definition includes the phrase, "a significant decline in activity." Fourth, in examining the behavior of domestic production, we consider not only the conventional product-side GDP estimates, but also the conceptually equivalent income-side GDI estimates.Q: The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP.How does that relate to the NBER's recession dating procedure?
A: Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them.
In 2001, for example, the recession did not include two consecutive quarters of decline in real GDP.
In the recession beginning in December 2007 and ending in June 2009, real GDP declined in the first, third, and fourth quarters of 2008 and in the first quarter of 2009.
The committee places real Gross Domestic Income on an equal footing with real GDP; real GDI declined for six consecutive quarters in the recent recession.
Q: Why doesn't the committee accept the two-quarter definition?
A: The committee's procedure for identifying turning points differs from the two-quarter rule in a number of ways.