Recession of 2008? Evidence Is Still Weak

If I were an economic advisor to a presidential candidate, I couldn't say it:  The economy may not be in recession.

The generally acknowledged decider is the Business Cycle Dating Committee of the National Bureau of Economic Research, a non-profit organization.  They look at four coincident indicators, plus other indicators that the individual members may be interested in (tea leaves, the entrails of small animals, Chinese horoscopes, etc.)  Here are the big four:


Total business sales have clearly turned up.  (We don't have the official figures for June yet, but I plugged in the nominal values, adjusted for inflation with the personal consumption deflator, and got in the ballpark.)  Industrial production has also turned up the last two months.  ( I think NBER should look at manufacturing production rather than total industrial production, because total is pushed up and down by utilities' production, which is heavily influenced by weather.  If August is hotter than than normal, then electricity demand goes up for air conditioning, and industrial production increases. Manufacturing production has been up for the last three months.)

The decline in employment is troubling, but the magnitude of the drop is small compared to past recessions.

The worst problem is the drop in real personal income (excluding transfers).  The July figures, when we get them, will include last month's high inflation, due to high gasoline prices, so the real income level will be down.  August numbers are likely to be better, now that gasoline prices have retreated.  Nonetheless, personal income is the best argument for us being in recession right now.

In total, my best guess is that when it's all over, we'll call it a growth recession, meaning that the growth rate of the economy slowed significantly, but it wasn't quite a real recession.