This piqued my interest (via Mike Simonson):
Ignorance about recessions has taken hold because of a simplistic idea that a recession is two successive quarterly declines in gross domestic product (GDP), a measure of the nation’s output.
The idea originated in a 1974 New York Times article by Julius Shiskin, who provided a laundry list of recession-spotting rules of thumb, including two down quarters of GDP. Over the years the rest of his rules somehow dropped away, leaving behind only "two down quarters of GDP."
Of course, now that the NYT’s archives are available online, I went straight to the original article to see what the other rules of thumb were.
Shiskin breaks his rules down into rules of thumb for duration, depth, and diffusion – all of which are necessary, in his view, for a bona fide recession, although ultimately identifying recessions must be qualitative and not quantitative. In any case, here are the rules of thumb:
- A decline in real GNP for 2 consecutive quarters
- A decline in industrial production over a six-month period
- A 1.5% decline in real GNP
- A 1.5% decline in non-agricultural employment
- A two-point rise in unemployment to at least 6%
- A decline in non-agricultural employment in more than 75% of industries, as measured over six-month spans, for 6 months or longer
If you use these criteria, I think it’s pretty clear we’re not in a recession – I mean, we’re not even close to a 1.5% decline in real GNP, nor to a two-point rise in unemployment. I’m not sure I fully understand Shiskin’s diffusion criterion, but I don’t think it obtains, either.
Of course, there’s no particular reason we should judge a 2008 recession using 1974 criteria. It’s just worth noting that if all of Shiskin’s rules of thumb were actually happening, people would be moaning a lot more loudly than they are right now.