A View from the NBER Recession Indicators

The current job market is closely tracking the employment situation in 2001. Here it’s important to keep in mind that although the recession was declared to have ended in November of 2001, the bear market in stocks resumed after a brief period of strength, and ultimately continued for another 15 months. The bear market finally ended about 5 months prior to a sustained improvement in the job market. Even if the recession is eventually determined to have ended last year, the NBER may take their time in dating it. In each of the last three recessions, because the primary metrics they follow were mixed, the group waited until GDP increased to a new high – or was forecasted to reach a new high in the current quarter – to declare that the recession had ended. With the signals clearly mixed here – manufacturing and output indicators rising and household income and job prospects moving sideways or contracting – the group may also take a wait-and-see approach. With real GDP still down more than 3 percent from its peak, it would go against precedent for the group to declare the end of a recession with the mixed signals that are currently in place.