Recession Started in 2007?

Randall Hoven @ The American Thinker questions the NBER's calling of the last two recessions, using their own data and definitions. The NBER is the "official" body responsible for announcing recessions.

"The rule of thumb for defining a recession is two consecutive quarters of negative real growth in GDP. This is now the second recession called by the NBER in the two terms of President George W. Bush, yet in neither case were there two such consecutive quarters. In fact, at no time in Bush's Presidency were there two such quarters.

Of all 11 NBER-called recessions since 1947, only one other involved no two consecutive quarters of negative real growth. That was the recession of April 1960 to February 1961. However, that recession involved one quarter with significant negative growth, -5.1% annualized, and a cumulative -1.0% growth for a whole year."

Neither the 2001 or 2007 recession had two consecutive quarters of negative growth, and both had year to year gains (Q4 2000 to Q4 2001, +.2%, Q3 2007 to Q3 2007, +.7%). In all other nine recessions since WW2, there was at least in quarter of year over year negative growth.

The NBER actually assignes the start of the 2001 recession in March, yet the first quarter of negative growth (-.5%) was actually in Q3 2000, under President Clinton. Yet the same figure in March under President Bush is called the beginning of the recession. The Q4 2007 number is better (-.2%) yet, but that is also a recession. ???

Hoven takes a quick look at unemployment figures, yet the 4.3% number from March 2001was better than every month of the Clinton presidency before March 1999. The December 2007 number of 5.0% actually improved over the next two months, and UE was still 5.0% in April 2008. But the NBER still calls it a recession, even though UE never dropped under 5.0% under Clinton until May 1997 - without a recession.

NBER says it also looks at the "income side". Hoven examines Disposable Personal Income (DPI) numbers in late 2000 and ealry 2001, and finds another curious result. Three of the last four months of 2000, DPI declined, but no recession. Yet in the first three months of 2001, DPI increased, and it was (supposedly) a recession. Strikes one as a bit odd, don't you think? Hoven looked at all the numbers from 1947 forward, and here's what he found.

"That is, without trying really hard, using real GDP data easily available from the St. Louis Fed only, and programming simple rules in a spreadsheet, I was able to match 9 of the 11 NBER-called recessions, with no false alarms and with, at most, one quarter mis-match in timing. The only two exceptions in any of this? The two recessions under George W. Bush."

Interesting. And as Hoven points out, there is no real transparency in how the committee determines recession, only "rules of thumb", which apparently in the case of the last President, don't really apply.