Wall Street and Washington are loudly debating whether the US economy can escape a recession -- but that monumental judgment will be made by eight eminent economists meeting quietly and far from public view.
While many countries define an economic downturn as two consecutive quarters of negative growth for gross domestic product, the US defers this assessment to elite academics at the National Bureau of Economic Research, based in Cambridge, Massachusetts, whose leaders scoff at the two-quarter benchmark as simplistic and misleading.
Recessions have huge impact on markets and US politics. So the NBER Business Cycle Dating Committee of six men and two women -- led by Robert Hall, a 78-year-old Stanford University professor -- can expect harsh criticism if it declines to swiftly declare one on President Joe Biden’s watch following two straight quarters of shrinking GDP.
But the nonpartisan panel, which was established in 1978 by former Ronald Reagan adviser and NBER president Martin Feldstein, has gone out of its way to keep politics out of the process.
The committee meets in secret and doesn’t announce its gatherings in advance or even in retrospect, unless there’s a press release declaring a formal decision.
And it typically takes the panel about a year to decide on a recession call, though some decision have been made in a few months while others have taken almost twice as long. That’s almost always well after a recession has been widely recognized by Wall Street.
The committee has never reversed a call.
Its other seven members include Christina Romer, head of President Barack Obama’s Council of Economic Advisers, and Robert Gordon, author of an influential book predicting dire US growth in the next century.
Past members have included former Federal Reserve Chair Ben Bernanke; Greg Mankiw, chief White House economist for President George W. Bush; and Feldstein, who died in 2019.
It’s a mixture of economists who have had leading political roles over at least four presidential administrations and “Ivory Tower eggheads,” said Harvard University professor Jeffrey Frankel, a former committee member.
The group is focused strictly on the economic data, and “the subject of politics never came up, not once,” said Frankel, who served on the committee from 1993 to 2019 except several years when he served on President Bill Clinton’s CEA. “It’s a credit to Martin Feldstein and Jim Poterba that there have never been political attacks on the committee.” Poterba, a Massachusetts Institute of Technology professor, leads the NBER today.
The NBER doesn’t try to time announcements to avoid any impact on elections, saying that would be aiding one side or another. The group declared a 2020 recession only a few months after a sharp decline in output and loss of 22 million jobs.