Some Trends in Key Recession Indicators

by: Menzie Chinn posted on: June 10, 2008

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Since December 2007 is a commonly identified turning point [1], [2], I thought it would be of interest (given Jim's take on whether it matters if we're in a recession) to see what the indicators that the NBER BCDC focus on -- payroll employment, industrial production, real personal income less transfers, real manufacturing and trade sales, and to a lesser extent monthly real GDP -- are doing. They're declining...

Figure 1: Log payroll employment (blue) and log industrial production (red), both normalized to 0 in 2007M12. Green shaded area is conjectured recession dates. Source: Federal Reserve Board via St. Louis Fed FRED II, accessed 8 June 2008.

Figure 2: Log personal income less transfers in Ch.2000$ (blue) and log manufacturing and trade sales in Ch.2000$ (red), both normalized to 0 in 2007M12. Real personal income calculated by subtracting off transfers from personal income, and deflating by the personal consumption expenditure deflator. Green shaded area is conjectured recession dates. Source: BEA GDP release of 29 May, and Supplemental Table 2BU, and St. Louis Fed FRED II, accessed 8 June 2008, and author's calculations.

Figure 3: Log GDP in Ch.2000$, normalized to 0 in 2007M12. Green shaded area is conjectured recession dates. Source: Macroeconomic Advisers [xls], May 15, 2008 release.

One point to keep in mind, when comparing against previous downturns: for the last few months, the indicators are either preliminary or once/twice revised, while viewing back in time, one will be looking at final, revised, data. For the issue of vintage data and revisions, see these posts (see Creative Destruction, as well as these posts [3], [4], [5]). To access vintage data, see the St. Louis Fed's ALFRED system.

With that caveat in mind, it looks to me like we've passed at least a local maximum, and indicators are trending down.

Update:

kharris has mentioned that in the past I've included two series of monthly GDP. I was trying to hew closely to the NBER BCDC focus series, but since you asked, from e-forecasting, June 6 release:

May Report --

Difficult to Avoid GDP Decline in Second Quarter

May GDP--Flash Estimate

Our next GDP report-- 2nd estimate of May GDP -- will be released Tuesday, June 17th.

Editor: Maria E. Simos

According to e-forecasting's Flash Estimate of U.S. Monthly GDP, the nation's output of goods and services, declined in May.

Following a decline of 2.7 percent in April, the real-time monthly GDP, expressed at seasonally adjusted annual rates in chained 2000 prices, fell 0.5 percent in May to $11,680.9 billion. Looking at the annual growth rate of monthly GDP's three-month moving average from three months ago, the economy's output in May remained unchanged as the growth rate posted 0 percent. This growth rate is the monthly equivalent to the publicized GDP quarterly growth rate from the preceding quarter. In reality, the growth rate of the three months ending in the last month of the quarter is identical to the quarterly growth rate.

The six-month smoothed annual growth rate of the U.S monthly real GDP, which historically has signaled the recession phases of the business cycle, recorded a positive reading of 0.4 percent in May, after posting a positive growth rate of 0.7 percent in April. This compares to a long-term annual average growth rate of 3.3 percent during 1959-2006.

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