It’s not surprising that a very divided America can’t even agree on whether the country has entered a recession.  Republicans and the conservative media are certain that all that is needed is two consecutive quarters of GDP decline.  While this measure is a popular rule of thumb, it is not the official definition.  

The National Bureau of Economic Research (NBER) is officially tasked with identifying U.S. recessions, and its definition of a recession is more broad and less precise in nature. The NBER standard says a recession is “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”  

Let’s see how NBER called the previous two recessions, one in 2020 at the start of the Covid pandemic, and the other in connection with the great recession in the 2007-2009 timeframe. 

As to the 2020 recession, NBER didn’t officially make the call until July 19, 2021, well over a year later than the start of the downturn.  Here is its message: “Cambridge, July 19, 2021. The Business Cycle Dating Committee of the National Bureau of Economic Research maintains a chronology of the peaks and troughs of US business cycles. The committee has determined that a trough in monthly economic activity occurred in the US economy in April 2020. The previous peak in economic activity occurred in February 2020. The recession lasted two months, which makes it the shortest US recession on record.”

As to the great recession, NBER didn’t officially make the call until December 1, 2008.  As part of that declaration NBER said the economic downturn began in December of 2007.  

Thus, in terms of the official declaration of a recession, it has been common practice for NBER to make the call a year or more after an economic downturn begins.  The NBER, in making such determinations, does go back and clarify when the recession actually began.  

This practice makes sense because the NBER doesn’t simply declare a recession when there have been two consecutive quarters of GDP decline.  Rather, it looks at a wide array of economic data to determine whether there has been a significant decline in economic activity that is spread across the economy. Thus, for instance, in the current situation the NBER will take into account that unemployment is at a 40-year low, that wages have been increasing, and that the economy is coming down from a period of exceptionally high GDP growth (spurred in part by huge government stimulus relief efforts).  Also, a recession has never been declared when there has been historically low unemployment.  

Regardless of one’s political persuasion, we all need to recognize that the Biden Administration hasn’t changed the rules of the game.  Sadly, it’s all but certain that Republicans and the conservative media will preemptively apply the rule of thumb if tomorrow’s GDP numbers show two consecutive quarters of decline. They are going to jump the gun.  From a cynical but realistic point of view, I think they are cheering on high inflation numbers and recession because these conditions are central to capturing control of the House and Senate in the upcoming November midterm elections.  I hope I’m wrong, but I don’t think I am.