Who decides that a recession has begun?
In the United States no government agency declares a recession: a small committee of economists at a private research group does.
▶ Start the storyIn the United States, a small committee decides: the Dating Committee of the National Bureau of Economic Research, or NBER, is generally seen as the authority for dating US recessions. The NBER is a private research organisation, not a government agency, and its committee has eight members chosen by the NBER's president. The government's own says the designation of a recession is the province of that committee.
The committee uses a broad definition: a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in , real income, employment, , and wholesale-retail sales. A recession begins when the economy reaches a of activity and ends when it reaches its .
You may have heard a simpler rule: two consecutive quarters of falling GDP. That is how the United Kingdom and Canada define a recession, and it was a rule of thumb that some commentators grew fond of after a 1974 newspaper article by Julius Shiskin, then head of the Bureau of Labor Statistics. But the states that the two-quarters idea is not an official designation. There is no official definition of a recession at all, according to the International Monetary Fund.
Two-quarters rule
- Negative GDP growth in two consecutive quarters
- Used in the UK and Canada
- Not an official designation in the US
NBER committee
- Eight economists judge case by case
- Looks at GDP, income, jobs, output and sales
- Dates a and a , often after the fact
The committee also works looking backwards. It is a retrospective marker rather than a real-time referee, so the news that a recession started can arrive long after it began.
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Recap
A recession is dated by judgement after the fact, from peak to trough, not by a single two-quarter rule.
💡 A trick to remember it · Two quarters is the quick glance; the committee is the slow second look from peak to trough.
Surprising fact · The NBER can announce a recession's start or end more than a year after it happened.
Connects to
- 🧮 How do you add up everything a country makes, and why did a war make it urgent?
- 👷 Who counts as unemployed, and who quietly disappears from the number?
- 📏 What does GDP per person really tell you about how rich a country is?
- 🪙 Why did the countries that abandoned gold escape the Great Depression first?
- 📉 What actually causes a recession?
Sources (2)
No source, no claim. Every fact in this lesson (16 claims) cites at least one of these.