Taps Coogan – July 31st, 2021

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The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) has been more or less officially tasked with the job of defining the beginning and end of a recession in the US. As Statista notes, NBER defines the timing of a recession as follows:

“According to the NBER’s conventions for chronicling economic cycles, a recession begins in the first month following a peak in economic activity and ends in the month of the subsequent trough…”

“While the protracted length of an economic contraction is usually one of three criteria for determining a recession – depth, diffusion and duration – the NBER states that “extreme conditions revealed by one criterion may partially offset weaker indications from another.” In this particular case, “the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions,” as the committee rightly predicted in June 2020, when it announced the recession.”

According to NBER, the Covid recession only lasted two months, making it the shortest in American history, as the following chart from Statista highlights. 

While one can debate the utility of these dating methods, the period of actually negative month-over-month economic activity probably did only last two or three months.

For those keeping track, we shared an article back in October 2020, noting that Lakshman Achuthan of the Economic Cycle Research Institute had proclaimed the recession to already be over.

We also noted all the way back in April 2020, when seemingly everyone was forecasting a great depression or an ‘L’ recovery, that the doomsday scenarios were overblown, stating: “What worries me more (than a prolonged crisis), however, is the real possibility that the Fed and the federal government will find delivering stimulus to be a very hard habit to kick when this temporary crisis passes.”

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