December 1, 2008

NBER Goes into the Tank; Says Recession Began and Remained in Effect Through Two Quarters of Growth

Filed under: Economy,Taxes & Government — Tom @ 1:04 pm

I’m feeling ill and would otherwise comment on this further.

The National Bureau of Economic Research says that a recession began in December 2007.

Economic growth in the first quarter of 2008 was 0.9%.

Economic growth in the second quarter of 2008 was 2.8%.

I could possibly accept a recession call if the second quarter came in at about the same level as the first. But it didn’t. Not even close.

As it is, the NBER is, to use a technical term, officially full of crap, and should once and for all become a national laughingstock. You can’t have nearly 3% growth in a quarter and claim that a recession remained in progress during the entire quarter. Double-dip? Maybe. Continuous recession? Forget it.

Keep in mind that I have been blaming the POR economy led by Nancy Pelosi, Barack Obama, and Harry Reid for the recession that, while not yet official under the normal people definition, more than likely began in June. It would be very easy and politically convenient to retroactively shift the blame to P-O-R all the way back to December 2007, as that month was during the first quarter of the first budget the Pelosi-Reid Congress passed. But I’m not going to do it. Yes, they did some damage in the fourth quarter of 2007, but the economy bounced back, especially, as noted, in the second quarter.

That said, keep in mind that if you want me to surrender on when a recession began, I will also have to surrender on when the POR Economy began. Tempting, but I won’t.


UPDATE: Even with the qualifiers, the NBER has contradicted itself. This is from its official statement

Q: Are there estimates of monthly real GDP?

A: Yes. Macroeconomic Advisers, a consulting firm, prepares estimates of monthly real GDP. Many of the ingredients of the quarterly GDP figures are published at a monthly frequency by the Bureau of Economic Analysis. Macroeconomic Advisers aggregates them, and then uses a statistical procedure to adjust the monthly estimates for each quarter to make them consistent with the Commerce Department’s official quarterly figure. The monthly GDP numbers are fairly noisy and are subject to considerable revision. Estimated monthly real GDP reached one peak in January 2008 and another, higher peak in June 2008.

The existence or absence of a recession is all about whether an economy is smaller or larger, respectively. NBER acknowledges that the (imperfect) monthly GDP measurements were bigger in June 2008 than in January 2008, implying of course that they went down, but then up further, in between. This makes the beginnings of a case for a double-dip. Yet NBER has declared that a recession began in December 2007, and hasn’t stopped. This really is stuck on stupid.


Previous Post: As noted here 2-1/2 years ago (March 26, 2006 — On the Timing (and Existence) of the Last (2000-2001) Recession), NBER “somehow” changed its assessment of the timing of the last recession period after the fact. Originally, they had it pegged from July 2000 through March 2001. Then they changed it to March through November, 2001. As I said in the post: How convenient.



  1. Unless you are in print, the recession has been going on for years… This I suspect is the real source of continual recession talk during the Bush Admin.

    Comment by dscott — December 1, 2008 @ 5:00 pm

  2. Warning, Danger Will Robinson, Danger!

    It seems the bureaucrats have decided to back date the recession to justify some things you and I would be screaming about at the top of our lungs. This is why they are foisting the NBER estimates proclaiming we have been in a recession since last December. Another variation on the “WE MUST DO SOMETHING” meme.

    Fed Signals More Action as Slump Drags On
    Recession Began a Year Ago, Making It Longest Since Early ’80s, Panel Says; Bernanke Considers Rate Cuts, Bond Purchases

    It could bring down long-term rates now by purchasing Treasury bonds itself. A central bank has the capacity to effectively print money by injecting reserves into the banking system and could use the funds to buy securities like bonds. In normal times, this would be highly inflationary. But Mr. Bernanke noted that the recession is putting downward pressure on inflation now, which gives him flexibility to keep pressing with new measures to battle the recession. He also said the Fed would unwind its programs when the economy stabilizes, to help guard against inflation.

    The Fed has already taken a big step toward targeting long-term interest rates. Last week, it said it would buy up to $600 billion in debt issued or guaranteed by Fannie Mae, Freddie Mac, Ginnie Mae and Federal Home Loan Banks, all mortgage businesses with close tied to the government.

    I really hate to say it…but I told you so. Thus the printing of money begins in earnest. Be afraid, be very afraid, because this is an acknowledgement the government could not draw enough private sector money to fund all their proposed schemes and so as I predicted, they would take the next step. The Fed is doing everything it can to dictate low interest rates by artificially not allowing them to rise in response to weak bond sales. This is in essence a cover up.

    Comment by dscott — December 2, 2008 @ 8:46 am

  3. Watch the Moody Baa Bond rates as this reflects the real interest rates needed to draw investment capital for private enterprise. Only $350 billion of the $700 has been spent so far, now imagine what will happen when they go for the $500+ billion stimulous package! The idiots in government will suck the life out of the private markets and thus the downward spiral will intensify…

    Comment by dscott — December 2, 2008 @ 9:21 am

  4. Adjusted Monetary Base:
    Looks to me since September the Fed has printed about $650 billion so far… around a 40% expansion of the money supply. Or am I misinterpreting what this chart represents? If so, where did the money come from????

    Comment by dscott — December 2, 2008 @ 3:30 pm

  5. Tom, thanks for the inspiration, your article helped connect some more dots:

    Comment by dscott — December 3, 2008 @ 8:05 am

  6. Dan, great point you made in your piece about productivity. The economy can grow and still shed jobs. It’s less than a desirable situation, but it doesn’t change the fact that it’s growing.

    According to NBER “logic,” agriculture has been in recession for 60 or more years, even though output has steadily increased, because it has gone from employing a double-digit percentage of the population to about 2%.

    Comment by TBlumer — December 3, 2008 @ 8:35 am

  7. Excellent article on AT:

    The punch line is at the end of the article.

    Comment by dscott — December 4, 2008 @ 10:48 am

  8. Your continued laser-like focus on GDP, to the exclusion of any and all other metrics, is the singular reason you’re so confused about the NBER’s call. Those of us who accept that they look at much more than GDP, and that GDP is just one of the ingredients in the mix, can actually successfully anticipate their call. It simply isn’t that difficult.

    Of course, when I was here back in May trying to explain the situation, I had your friend Rose chiming in, “There you go again Tom, talking over a 6th grade level. Sweetie, this ignoramus obviously went to a really bad public screwal (redundant) or was home schooled by an illiterate parent. Perfect example of a liberal whacknut… I may print this out and read it on the radio.” Yup, I certainly embarrassed myself with the comments I made back in May arguing that a recession was underway.

    Comment by Invictus — December 6, 2008 @ 2:19 pm

  9. #8, yeah silly me, recession is about the absence or presence of economic growth, it is NOT NOT NOT what the NBER says it is (diminishing economic activity or some such BS).

    They don’t own the dictionary, and they don’t get to arbitrarily redefine words. Nor do you.

    They have joined you in the parade of embarrassment. Nothing has changed.

    Comment by TBlumer — December 6, 2008 @ 7:52 pm

  10. [...] century.” I still think that the NBER’s recession call earlier this month is “full of crap” — that is, premature and not supported by the [...]

    Pingback by BizzyBlog » Latest Pajamas Media Column (’Obama’s Race Against the Economy’) Is Up (UPDATES: Other Favorable Signs; Thoughts on NBER’s Recession Call) — December 26, 2008 @ 8:03 am

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