As if bracing for impact, the White House on Thursday posted a blog tackling what constitutes a recession and its “official definition.” And right off the bat, they dump what’s perceived widely as the rule-of-thumb definition, which is two consecutive quarters of negative GDP.
The White House cites the National Bureau of Economic Research (NBER) Business Cycle Dating Committee as “the official recession scorekeeper.” And they define recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” The committee typically tracks four indicators: real personal income minus government transfers, employment, various forms of real consumer spending, and industrial production.
NBER doesn’t have fixed rules or thresholds that set off alarms for a decline. What they have done in the recent decades, according to the White House, is give more weight to real personal income less transfers and payroll employment.
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The White House highlights that 1.1 million jobs, or an average of 375,000 jobs per month, were created in Q2. This figure is three times more than in any three-month period leading up to a recession.
While NBER’s chart shows growth in these four indicators, forecasts of the second-quarter growth, which will be reported on July 28, range from Bloomberg’s 0.9% to the Federal Reserve Bank of Atlanta’s GDPNow model’s -1.6%.
Information for this briefing was found via Twitter, The White House, Insider, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
