Rather than two negative GDP readings, the NBER is looking for a substantial decline in activity over a sustained period of time. The committee sets dates of the peaks of economic activity and troughs based on six monthly data series, including nonfarm payrolls, personal consumption spending and industrial production.
During a long expansion like the 1990s, the committee can go years without a meeting, and members only exchange calls or emails as they update Frequently Asked Questions on the website, Frankel said.
US GDP contracted in the first quarter and trackers of economic activity, such as the popular Atlanta Fed indicator GDPNow suggest it will do so again in the second quarter when data are release on July 28. However, apart from a possible negative GDP print, many indicators suggest the economy is still expanding.
As a rule, Hall, who has led the committee since its inception, says he won’t comment on economic data. He’s unaware if the committee has ever declined to declare a recession following two negative GDP prints.
The committee, in addition to using the six monthly indicators, does consider GDP averaged with less commonly followed gross domestic income, which was positive in the first quarter.
The NBER was founded in 1920. It published its first business cycle dates in 1929.
Former NBER President Arthur Burns co-wrote a book in 1946 called “Measuring Business Cycles” that was “the bible on the subject,” said Michael Bordo, an economics historian at Rutgers University. “Its dates became accepted as the best authority. One of the reasons they were so respected is that they were totally independent of government.”
Burns went on to be one of the least successful Fed chairs, from 1970 to 1978, when inflation accelerated as the central bank misjudged the tightness of the labor market.
This article was provided by Bloomberg News.