When Did the Recession Begin?

As noted in the post below this one, the NBER has dated the beginning of the recession as December 2007. Brad DeLong says that "I think that this was the right way to call it..." However a colleague, Jeremy Piger, has a recession dating model that indicates it wasn't exactly clear when the recession began. His recession probabilities are:

200705	1.2%
200706	1.4%
200707	1.8%
200708	2.9%
200709	4.6%
200710	7.3%
200711	10.4%
200712	17.1%
200801	23.6%
200802	33.1%
200803	37.4%
200804	42.7%
200805	47.7%
200806	54.9%
200807	66.0%
200808	96.2%
200809	99.2%

According to these numbers, one could reasonably put the peak anywhere from October 2007 to May of 2008. Here's a graph of the recession probabilities from June 1967 through September 2008:

Comments

[bakho]

It is really a continuum. The best reason to shout the R word is to bludgeon a recalcitrant administration. Too late for that to have an effect.

[ken melvin]

The worm turned mid 2005.

[Bob O'Lynch]

Bludgeon a recalcitrant Administration? I think not: even a progressive Administration (which W's has not been) would take the "R" word, and mull it over ... assessing what carrots and sticks it has to deploy. Interest Rates ... big carrot, big stick. Military spending ... big carrot, polictically a double-edged stick. Loosening up the rules ... a big corporate carrot, ... but when it fails as presently is the case, a huge swinging log.

Take heed of the abgenesis of The Big Problem: all through Clinton's fine Administration, rules were loosened, ReFi's were issued, people came to believe that houses would never go down. All through W's besmirched Administration, rules weren't tightened, yea ... even the Fed blessed the MBS's and the like. Why not? Congress didn't seem remotely concerned that the whole thing was becoming pear-shaped! That, and there were Wars to fight, Principles to uphold, Banks to bail, and the Opposition to assuage.

No. The use of the RECESSION rubric is an passenger's quip, not a driver's whip. Jeremy Piger's fabtastic statistical approach, again, shows what IS, not what will come to be. The W-admin certainly hasn't taken the action it has 'cuz it was goaded by the R-word. It has taken it because the Fed woke up one afternoon to the Economy-by-way-of-Banking rapidly collapsing in a self-supporting spiral of runs, barriers, stop-losses breached and nominally 'silent partners' suddenly up-in-arms about the situation. It had to react, it had to act, it had to push out numbers, mandates, mollifiers and questionable statistics to support its twin phalanx offensive: to counter the loss of faith in the credit system and to pave a new road to stimulus spending at the same time.

[Barkley Rosser]

There are plenty of bodies around out there available to call a recession for an administration earlier than the NBER, such as the CEA and the NEC. They should be doing it.

Of course, once one allows for a judgment call based on multiple variables, rather than just the old textbook "two successive quarters of negative GDP growth," things are going to get messy and complicated and fuzzy.

[donna]

I have a friend who was laid off in L.A. over a year ago. For him, the recession started then. And certainly isn't over yet. Fussing over when it started isn't all that helpful in terms of getting people back to work.

[cm]

"it wasn't exactly clear when the recession began"

Isn't it not even exactly clear what the definition of a recession is?

[calm'Oleary]

You wouldn't B Irish, would you Bob O'Lynch?
So the official application "recession", [BOINK] needing to discover 2 successive quarters of declining GDP which is notoriously revised through 2 sometimes 3 quarters, means that this pronouncement could B actually early!...and not shameful, nor dysfunctional.

'Do like every fabtastic thing you say here...(so how's your personal recession going, speakin of passengers?)
[Iz you or iz you not related to paine?]

Ok, if I may,(calmo's licence to obscure any decent post: his interpretation) in the application (official now) the public contains some of the uncertainty by placing his/her experiences in the bag marked "recession"...it is the 1st measure of containment: that step back from "OMG, we're all gonna die!".

Ok, waiting for the Depression now, just to hear Bob O'Lynch's report about dat one.

[Patricia Shannon]

It appears we need at least two definitions of recession. One for the ultra-rich, another for the rest of us.

[paine]

mark your department mate's " recession probabilities "
crossed the 50% line this past may ???

how does that get read as signaling recession
last december ???

because it started moving up fast around then ???

[paine]

guys
you gotta look at it like marty feldstein would

a recession is for wage control
once it starts u gotta stall the response so it does its work
which is
create a job market horror pit for enough shed jobsters
so the rest take their hourly wage ration and...like it

[paine]

u can't stall a recession response better
then to not officially see it
till its well under way

[Bruce Wilder]

I think we already have two definitions. Republicans tend to emphasize GDP growth, which ties to aggregate income, and Democrats tend to emphasize employment and hours worked.

[paine]

ironically
though the ad hoc warning system is set for delayed alam bells
this recession was not an induced wage control recession
it was not a private profit system preserving course correction
it was a pure asset blow out triggered recession
not like the last recession
which was induced by credit tightening and a jumping jack dollar
pre dot com blow out
or the one before that which was ...

but still delay minimization etc etc kicked in

too bad this time
so many big boys got caught in their own fudge trap

[paine]

bruce

what's a good definition of inane at this point

[Jay]

"It appears we need at least two definitions of recession. One for the ultra-rich, another for the rest of us."

It appears we need at atleast three definitions of recession. One for the ultra-rich, one for the ultra-powerful (the 1% in Washington that control 80% of the power) and another for the rest of us.

[Bob O'Lynch]

Calm O'Leary ... yes, from a wee corner of Ireland my family hails, heartily I might venture. I do not ken that paine and I have family in common. Thanks to you, for the kind affirmation. The "personal recession" ... is deeper than I had imagined, and this is but the beginning.

For ask yourself this: just supposing that the 'problem' is ultimately rooted the $1,400B per anum loss of disposable income leined on the common sod by Wall Street's great mortgage decoupling adventure, AND supposing that the credit card usurers are working up to cut $2,000B out of the 'soft landing' hammock, THEN what tooling does our Fine Government have to actually, rapidly, soundly and meaningfully address our "personal recessions"?

I'm at a loss to feign an answer.

The Gift of Gold given to the herd of Banking Bulls ... impacts the common sod hardly at all. What diminimus fraction-of-a-fraction did you get, O'Leary? A pocket full of shillings? A single crown? Not a fiq to you, nor I. We can't be too hard on the Banks ... they didn't deploy all that gold leaf for gay new signage and lollypops for the kiddies. I'm not sure where it has, or is going. But not to you, and not to me.

What clinkers in are left in the Governor's coal sack, I ask?

I hear it told that our Leaders' ears are veritably being stuffed with high regard for a Spending Solution. Fine, so be it. But who exactly needs to be talking today, to spend money tomorrow? If we were both drunk, 'tween us we could conjure the rightful answer: CONGRESS. But it is they, not we who are drunk: they are on VACATION for the rest of the year. Vacation! I should think that they'd be holed up in their congressional offices, sleeping on cots, desparately needing a change of suit and tie, but courageously discussing and DECIDING in a relatively non-partisan fashion, the formulary for hoisting the American economy out of the fire. One might then be proud of the pin-striped roosters and cockatrices that we elect to ... to ... to deal with serious matters of State. Vacation.

So this becomes the central issue for me when I'm not more worried about the declining balance sheet of my family's assets and our increased liabilities. The address must speak to the plight of the common sod, and must do so in a way that restores a measure of personal liquidity into the equation. Perhaps this calls for the Voodoo Taboo, inflation. Perhaps this calls for extraordinary tax refunds, lowered tax rates, ... and inflation. Perhaps this calls for nationalized 30-year fixed-interest government backed mortgages for one and all ... and inflation. Perhaps we would do well to ensure that a trill or two be earmarked for the Energy Sector, that we might work toward freeing us from the yoke of foreign oil. And inflation.

But those ideas work only in that land where King Bob has sway. The Land o'the Free has a different agenda and way of resolving crises.

[Barkley Rosser]

There is an old joke.

If he is laid off it is a slowdown.
If you are laid off it is a recession.
If I am laid off it is a depression.

says...

Paine:

ironically
though the ad hoc warning system is set for delayed alam bells
this recession was not an induced wage control recession
it was not a private profit system preserving course correction
it was a pure asset blow out triggered recession
not like the last recession
which was induced by credit tightening and a jumping jack dollar
pre dot com blow out
or the one before that which was ...

[This is different, and the failure to understand the difference tells much about the failure to recognize or be willing to recognize difficulties developing for ordinary workers or households.]

[anne]

Paine:

guys
you gotta look at it like Marty Feldstein would

a recession is for wage control
once it starts u gotta stall the response so it does its work

[There really is an important sense in which the wish to delay recognition of a recession has to do with allowing the labor market to sufficiently weaken. At least this seemingly became a truism, rather than darkly comical and fought, with Paul Volcker as Federal Reserve chair.]

[anne]

Darn, the nameless comment was mine for reasons I do not undetrstand.

[Patricia Shannon]

Bob O'Lynch

Since the Senate is still almost 50% Republican, maybe it's just as well they aren't making a lot of decisions.

http://www.nationmaster.com/encyclopedia/United-States-Senate-elections%2C-2006

The party balance for the Senate now stands at 51-49 in favor of the Democrats (including Independent Bernie Sanders (Vt.) and Independent Democrat Joe Lieberman, who caucus with the Democrats).
And Lieberman is hardly to be depended on as a Democrat.

[Ken Houghton]

I would still argue anecdotally for October of 2007, but looking at that model, the case for December is fairly obvious (yes, second moments).

"Two successive quarters of negative GDP growth" carried with it the assumption that you would not have reckless Spend-and-Spend policymaking; that gets forgotten these days in Republican Administrations. (Op cit. Bruce Bartlett's argument)

At least NBER decided they wouldn't let the sleight-of-hand tax-rebate-without-payback fool them this time, even if they did have to explain their reasoning. (As Paine noted above, H(0) would be that if Feldstein were still running NBER, it still wouldn't be called.)

So the United States currently has the longest recession since before Barack Obama joined the workforce. Welcome aboard, Mister President.

[cm]

paine: "so the rest take their hourly wage ration and...like it"

Take it - yes, like it - not so much. In every profession there are ways to play "by the book", while having your butt covered (as much as one can). A lot depends on the peons taking initiative and going the extra mile without specific orders. From direct observation and anecdotal stories it looks to me like over the past few years the "spirit" has been in decline.

Of course, everything is a matter of degree. Most of the work still gets done, and will continue to. But the "competitiveness" ...

[Bruce Wilder]

The probability post started me thinking that assessing the probability of a recession was kind of interesting, and conceptually different from what the dating committee does.

What kind of process produces the business cycle? Is a recession a distinct, and distinguishable, phenomenon? Or, is it just the artifact of a random process? Are we observing a distinct, temporarily self-sustained process amidst chaos?

Is Piger trying to assign a probability to the possibility that the economic data for a given month or quarter will qualify that period of time in a later classification as a recession? Or, is Piger trying to assign some probability to the emergence of a self-sustained spiral of recession (or expansion in the converse) in business activity? Kind of like trying to spot the emergence of hurricanes in the chaos of tropical Atlantic weather.

[Bruce Wilder]

Hobby horse on the loose: Economists View: Does a Downward-Sloping Yield Curve Predict a Recession?

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