March 10, 2008

Recession Update

The National Bureau of Economic Research (NBER), under the leadership of Martin Feldstein, is the official arbiter of the U.S. business cycle. NBER defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” I have written that, for many, 2008 will have the feel of a depression. And as events have unfolded in early March, I feel even more focused on my reading.

The Friday, March 7 report of a 63,000 job loss (preliminary) lends a new level of concern regarding the start of recession. The charts in my soon-to-be-released Intelligence Report clearly did not indicate the onset of recession as of most reliable and recent data. It is certainly possible a recession designation will be signaled with the release of the current month’s complete data. Data revisions are a regular occurrence, thus compounding the difficulty of accurately pinpointing the onset of recession. But I cannot emphasize enough the negative nature of the preliminary jobs report. It would be a rush to judgment, however, to designate a new period of recession until noted NBER factors, including industrial production, begin to turn negative. I will update you following the release of latest industrial production numbers at mid month.

Tags: depression, Feldstein, jobs report, loss, National Bureau of Economic Research, production levels, recession