The Recession Has Been Here For Awhile; Here's the Proof

While most of us know a recession when it hits us, economists only figure it out after the fact once all the data has settled. Here are the numbers that will backdate a new recession to at least April of this year.

In September of 2010, the National Bureau of Economic Research declared the recession ended in June 2009. They did this because of something they call a trough:

A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle.

1) In August the Bureau of Economic Analysis said the GDP grew at a rate of 0.4 percent for the first quarter of the year. In the second quarter it grew by 1 percent. The second quarter number was revised down from a July projection of 1.3 percent. There's no surprise in that; it takes a while for all the numbers to get crunched and understood in order to get the data right. According to a study by the New York Times:

The growth rate that the government announces roughly one month after the end of each quarter ... has been off the mark over the period from 1983 to 2009 by an average of 1.3 percentage points, compared with more fully analyzed figures released years later, according to federal data.

2) The BEA gets its final GDP numbers by subtracting inflation from the nominal GDP number it starts with. This is called deflating the GDP and the number used here is called the GDP deflator. As Doug Short points out, in order to do this the BEA

uses its own GDP deflator for this purpose, which is somewhat different from the BEA's deflator for Personal Consumption Expenditures and quite a bit different from the better-known Bureau of Labor Statistics' inflation gauge, the Consumer Price Index.

3) Here's why I think the above number is a lot more accurate. The following are the Census Bureau's most recent numbers and come via ProPublica, the non-profit center for investigative journalism.

• Americans below the poverty line in 2010: 46.2 million
• Official U.S. poverty rate in 2007, before the recession: 12.5 percent
• Poverty rate in 2009: 14.3 percent
• Poverty rate in 2010: 15.1 percent
• Poverty line in 2010: $22,314 for a family of four, or $11,139 for an individual
• Rough amount the poor are living on per week: $200 or less
• Poverty rate in American suburbs: 11.8 percent, the highest since 1967
• Percentage of the population making less than half the poverty line in 2010: 6.7 percent
• Percentage of the population making less than half the poverty line in 2007, before the recession: 5.2 percent
• Decline in median household income since 2009: 2.3 percent
• Decline in median household income since before the recession: 6.4 percent
• Official unemployment rate in August 2011: 9.1 percent
• Total unemployed people in August: 14 million
• People who were employed part-time for economic reasons in August 2011: 8.8 million
• People not counted in the labor force who wanted work: 2.6 million

If not foolproof, it boasts a decent record: previous incarnations of the index pinpointed the start of American recessions in 1990, 2001 and 2007. The index had been declining steadily from a peak in early 2009. September, however, has brought a change in the weather. The chances that a slowdown will become a recession still hang in the balance. But the hacks are getting anxious.

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Constantine von Hoffman

Constantine von Hoffman is a freelance writer and writing coach. His work has appeared in outlets such as Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, CSO, and Boston Magazine.

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