Sunday, January 20, 2008

By the Time NBER Announces A Recession, It's Over

From today's Washington Post: The NBER's pronouncements historically come long after recessions have begun, a whopping seven months on average. By the time the bureau announced the recession of 1991, it had already ended.

It's true. On April 25, 1991, the
NBER announced that a recession started in July of 1990. It later announced at the end of 1992 that the recession actually ended in March 1991. It was an 8 month recession, and it took the NBER 9 months to make the official determination.

And for the last recession that lasted from March to November 2001, the
NBER announced on November 26, 2001 that a recession started in March, just about the time that the recession was ending. In July 2003, the NBER made the official announcement that the recession ended in November 2001. It was an 8 month recession, and it took exactly 8 months for the NBER to make the official recession announcement.

Bottom Line: If the NBER's track record continues, by the time it announces the next recession, it's likely the recession will already be over. So s
it back and relax. Even if there is a recession in 2008 or 2009 or 2010, we probably won't know for sure until it's just about over. And by that time it will, well, be over.


At 1/20/2008 12:45 AM, Blogger bobble said...

" Even if there is a recession in 2008, we probably won't know for sure until it's just about over. And by that time it will, well, be over."

so you're conceding that there could be a recession on the way?

At 1/20/2008 9:54 AM, Anonymous marmico said...

Well, the President of NBER, Feldstein, is gearing up for the recession call.

Now Mark, should you decide to accept the mission, you would advocate that since the 21st century recovery has been weak, (otherwise known as the greatest story never told), in a historical context, the ensuing recession, if any, should be mild and shallow. LOL

Now if all the monoline insurers are insolvent, what percentage of the $2.4 trillion in "insured" paper needs to be written down.
Subprime is not contained.

Subprime was merely the first inning in a nine inning baseball game. Anecdotally, the commercial bank I do day-to-day banking with, just wrote down $2.1 billion with the ACA insurer debacle and that doesn't even show up on the Gaffen Watch.

At 1/20/2008 9:56 AM, Blogger Ironman said...

Let's put it this way: there is a building level of distress in the stock market, which often coincides with recessions in the U.S. economy.

The futures data (see the first link) at this time suggests a relatively short-lived event, and the duration of such disruptive events would seem to be a significant factor in determining whether the NBER will ultimately find that a recession has occurred.

Keep in mind that this analysis is all based on using the price-dividend growth ratio as a near real-time indicator of the health of the stock market, and by extension, the U.S. economy at large. Going back to the first link, what it has confirmed so far is that 2007 was free of recession through December and January 2008 would be the point in time at which a significant disruptive event in the market actually began.

To the best of my knowledge, that measure was first introduced by Political Calculations back on 6 December 2007. I'm not aware if it existed anywhere else before then, so I'm more or less inventing the tools and techniques for the analysis as I go.


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