Saturday, February 23, 2008

The NBER Business Cycle Dating Committee Is Starting to Talk Again

A couple of weeks ago someone was asking if the NBER Business Cycle Dating Committee is meeting again. These are the folks that officially define when a recession starts and stops. I seem to remember hearing that they met in December, but I could have been wrong. At any rate I found this article on the WSJ Online Economics dated about a month ago. Apparently they are beginning to at least talk again, after a very long dormant period.

The National Bureau of Economic Research’s Business Cycle Dating Committee, a usually dormant panel, started discussions this month — after a dismal employment report — about whether the U.S. is in a recession or entering one. The seven-member committee says it wouldn’t make any announcements about a recession until well after one has begun. But in interviews with Wall Street Journal reporters and other recent comments, some of the economists offered their individual takes:

Robert Hall, Stanford (Committee Chair): The December employment report was a “crystallizing event” that spurred the committee into early discussions of economic data, and monthly GDP figures are “not enough” to signal much. “At best the economy is flat right now. It stopped growing.”

Martin Feldstein, Harvard (NBER President): He says a recession is more likely than not in 2008, up from 50-50 odds last month.

Jeffrey Frankel, Harvard: “The primary concern has to be the domestic U.S. economy, and not the stock market,” he told the Boston Globe. “You have to guard against giving too much weight to Wall Street.”

Robert Gordon, Northwestern: The odds favor a recession starting late this quarter or next quarter, though “the best forecast now, based on guesstimates of first-quarter data, is that we’re not in a recession right now.”

David Romer, UC Berkeley: He’s not comfortable discussing a recession yet and only has “quibbles” with the Fed’s performance over the last six months. “If there are adverse shocks the Fed should do its best to offset them,” he said. “In general it would be good for the Fed to feel freer to move the funds rate a lot.” (Mr. Romer, along with wife and Berkeley professor Christina Romer, took Ben Bernanke’s spot on the NBER committee in 2002.)

Victor Zarnowitz, The Conference Board: Of the four monthly indicators tracked by the committee, two — industrial production and real personal income less transfers — appear to have peaked, in July and September, respectively. But, those peaks “can easily be reversed or moved through revisions,” he said. The other two — real manufacturing and trade sales and payroll employment — have not peaked yet. Monthly GDP peaked in September but “there are all kinds of problems” with that data. “There is no clear evidence of a peak. That’s my judgment. So no recession (yet), but it bears watching very, very closely.”

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