About one year ago, I wrote a post with the title “Are We in A Recession?” At the time there was much talk, both in the popular media and among economists, about whether we were in a recession or not, and what “technically” counts as a recession. Now with hindsight, I think we can pretty clearly say that we were not in a recession last summer, nor at any point in 2022.
One thing is true: GDP did decline for two quarters in the first half of 2022. In fact, even the more nuanced “real average of GDP and GDI” declined for two quarters. But as I explained in that July 2022 post, that’s not how the NBER defines a recession. It often coincides with their defined recession, but they used a separate set of indicators. And while some economics textbooks do use the two quarters of declining GDP definition, as I explained in a follow-up post, that’s not the most common textbook definition.
The first half of 2022 is a good candidate for a possible recession, but when we look at the NBER’s preferred 6 measures of economic activity, it seems pretty clear that this was not a recession. If you start the data in the last few months of 2021, you do have small declines in two measures through July 2022 (real personal income and real manufacturing sales), but this looks nothing like past recessions, which have large declines in all or most of the 6 measures.
OK, but that was then, this is now. Are we in a recession now or headed into one? You can find lots of models and surveys or different groups of economists out there. I’m not sure that any particular one is the best, so I won’t dive into those. But if we look at the average of GDP and GDI again, we do notice that 2022q4 was negative and 2023q1 was very weak. Maybe that was a recession?
Again, we can start the NBER indicators around that time to see. Starting from September 2022, we can indeed see that there is some weakness in a lot of the measures for the next 2-3 months. But when we look out 6 months or so from then, we once again only have 2 of the 6 indicators that are below the September 2022 level, and the declines are mild (less than 1 percent). You can play around with the start date a bit, but I think September is the best candidate for a peak, and it’s still pretty weak.
OK, OK, you say, but that’s still all the past. What about the future? Sorry dear reader, I don’t have a crystal ball or the economic equivalent (a model). All I can say is what the data shows right now (which is always backward looking), and as of right now most broad measures of the economy aren’t declining. Yet!
This doesn’t mean everything is great in the economy. Inflation is bad. Poverty is bad. Inequality is, often, bad. We always have these things. But are they getting better? Or are they getting worse? A recession is a particularly bad thing, and something that is often hard to precisely define and measure (for good reason: the economy is complex and hard to measure!). All indication of the available data is that, whatever other bad things are happening right now, a recession is probably not one of those things.
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