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Did recession begin in 2000?
Group that dates economic cycles considers extending most recent downturn; possible boon for Bush.
January 22, 2004: 3:01 PM EST
By Mark Gongloff, CNN/Money Staff Writer

NEW YORK (CNN/Money) - The committee of economists that sets the dates of U.S. recessions and expansions is considering moving the starting point of the latest recession to as early as November 2000 -- which could provide some political cover for President Bush.

The business cycle dating committee of the National Bureau of Economic Research, a private research group, will soon decide whether or not to change the starting date of the latest recession from March 2001, its current estimated starting month, NBER spokeswoman Donna Zerwitz told CNN/Money.

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The story was initially reported Thursday by the Wall Street Journal, though Zerwitz said NBER economists had been discussing the changes since a meeting early in January.

"The committee is waiting for more data at this point in time, and there might be changes to the historical dates of other recessions," Zerwitz said, noting the committee has set dates for every U.S. recession and expansion since 1854.

She added that, while the revision could be as dramatic as moving the starting date of the recession all the way back to November 2000, it could also be less drastic -- moving the date back to February 2001, when payrolls outside the farm sector peaked, for example, according to Labor Department measures.

Any date before January 2001 would be good news for Bush, who took office that month and is seeking re-election this year, as he could argue the recession began during the administration of his predecessor, President Clinton.

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Zerwitz said the NBER's discussion about changing the date of the recession was not politically motivated, but rather the result of adding a new set of data to the indicators they already use to measure cycles.

Zerwitz added that neither Bush nor Clinton should be held responsible for a cyclical recession.

Move would be unusual

But going back and changing a recession date would be extremely rare for the committee, and a potential new cycle-dating method -- using data generated by a private research firm -- could represent a marked change in the way the committee works, according to Lakshman Achuthan, managing director of the Economic Cycle Research Institute (ECRI), another private research firm in New York.

"This is complete break from the way recessions are dated," Achuthan said.

He was a protege of the late Geoffrey Moore, who founded ECRI, helped develop the NBER's cycle dating process and was a senior member of the committee until his death in 2000.

Achuthan said he hoped the committee -- which has seemed to act more hastily since Moore's death -- would tread carefully in making this change.

"I don't think it's bad to think of developing a new series to use, but it's also not bad to take your time in assessing any kind of change this big," he said.

For many years, the NBER dating committee has estimated the peaks and troughs of the economy using four basic indicators: job growth, industrial production, consumer income and the volume of sales by manufacturers, wholesalers and retailers.

In October 2003, however, the committee announced it was also using estimates of monthly gross domestic product (GDP), the broadest measure of the economy, generated by Macroeconomic Advisers, a private research firm.

The committee formerly paid less attention to GDP, simply because the Commerce Department only tracked GDP on a quarterly basis. The monthly GDP data now available are more helpful, Zerwitz said.

Though the committee has said those monthly numbers "are fairly noisy and are subject to considerable revision," it also considers them helpful in tracking the economy's cycles. And in time, revisions by Macroeconomic Advisers to older monthly GDP estimates could inspire the NBER to change its cycle dates, Zerwitz said.

One common definition of a recession is two consecutive quarters of a negative rate of growth in gross domestic product (GDP), the broadest measure of the economy. GDP shrank in the first three quarters of 2001, and the Commerce Department recently said revised benchmark data showed GDP also shrank in the third quarter of 2000.

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But Achuthan of ECRI said he worried that focusing on GDP could give less importance to a critical sector of the economy -- the job market. Moore and other founding members of the NBER committee focused on jobs, he said, because they often influence the other indicators -- if unemployment is rising, then incomes, output and sales typically fall, as well.

"That vicious cycle is the definition of a recession, and that's why it's important that the definition of a recession captures that cycle, "Achuthan said. "GDP alone doesn't do that."  Top of page




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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.