This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing how a recession is officially determined and some current indicators that suggest strength or weakness in the U.S. economy:
In an early July poll, 58% of Americans said they thought the U.S. economy was in a recession, up from 53% in June and 48% in May.
Yet many economic indicators, notably employment, remain strong. The current situation is unusual, and there is little consensus among economists as to whether a recession has begun or may be coming soon.
Considering the high level of public concern, it may be helpful to look at how a recession is officially determined and some current indicators that suggest strength or weakness in the U.S. economy.
Business Cycle Dating
U.S. recessions and expansions are officially measured and declared by the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), a private nonpartisan organization that began dating business cycles in 1929. The committee, which was formed in 1978, includes eight economists who specialize in macroeconomic and business cycle research.
The NBER defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” The committee looks at the big picture and makes exceptions as appropriate.
For example, the economic decline of March and April 2020 was so extreme that it was declared a recession even though it lasted only two months.
To determine peaks and troughs of economic activity, the committee studies a range of monthly economic data, with special emphasis on six indicators: personal income, consumer spending, wholesale-retail sales, industrial production, and two measures of employment.
Because official data is typically reported with a delay of a month or two — and patterns may be clear only in hindsight — it generally takes…
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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.
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