What is a recession?

I liked it better when the term “recession” had an actual meaning. It used to be that a recession was when real GDP declines two quarters in a row. By that definition, we were not in a recession as of the end of 3rd quarter (the most recent quarter for which data are available). For the last six quarters, real GDP growth has been:

2007 2007 2007 2008 2008 2008
 Q2   Q3   Q4   Q1   Q2   Q3
 4.8  4.8 -0.2  0.9  2.8 -0.5

If real GDP growth falls in the 4th quarter, as seems likely, we will have been in a recession (according to the old definition) since the 3rd quarter of 2008.

Now, however, we are in a recession whenever a self-appointment group of economists, the NBER, tell us we are.  According to them, we have been in recession since December 2007.  This is very strange, since we had two quarters of growth following December 2007, one of them being decently healthy, and both being larger than the decline in the 4th quarter of 2007.

If the NBER wants to redefine the word, that’s fine, but there’s no reason the rest of us have to go along.  I’m certainly not arguing that the economy is in good shape right now, but I do lament the loss of a well-defined term from our lexicon.

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