The National Bureau of Economic Research (NBER), the agency that measures the dates of US recessions which are all but universally recognized among American economists (probably the closest economists come to agreeing on anything!) officially announced today, Dec. 1, that a recession began a year ago in December of 2007 (Determination of the December 2007 Peak in Economic Activity):
The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.
A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.
Because a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity.
The committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment. This series reached a peak in December 2007 and has declined every month since then.
Recessions are popularly defined as two consecutive quarters of GDP decline. But that's not the formal definition that the NBER uses. They look at a wide range of factors in making their determinations.
The NBER measures recessions on an historical basis, not in real time. So it was only today that the beginning of a recession dated as a year ago was announced. And the end will also be formally announced months after it occurs. It's not likely, but it could even be that the recession that started a year ago will turn out to have ended already and the current contraction could be part of a separate recession.
The 20 years beginning with 1869 were notably rocky. The 1969-70 recession was followed by the Panic of 1873, which lasted until 1879. Another came along in 1882-85, followed by 1887-88.
The 20s may have roared. But there were recessions in 1918-19, 1920-21, 1923-24 and 1926-27. Then there was the Big One.
By the NBER's measures, the period of the Great Depression actually included two recessions and recoveries: 1929-33 and 1937-38. As Paul Krugman has been reminding other pundits in recent weeks, the latter recession occurred as a direct result of the Roosevelt administration's eagerness to balance the budget, which slammed the economy into a new recession.
People eventually stopped calling them "panics" because "depression" sounded less alarming. Then after the Great Depression, "recession" came to be the standard term.
I don't know if the NBER officially defines a "depression". But obviously if we count the Great Depression as running from 1929 to 1941 or so, it would mean an extended period of relatively low economic activity that could have recessions and recoveries within it.
Obama's new chief economist, Christina Romer, was on the NBER committee that dated recessions, though the press release for Dec. 1 says she was not part of the latest determination. Her husband is also a member of that committee, as well as being a fellow economics professor at UC-Berkeley.