A comparison of two business cycle dating methods

First, we do not identify economic activity solely with real GDP and real GDI, but use a range of other indicators as well.

Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology.

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On the other hand, the unemployment rate often continues to rise after activity has reached its trough.

In this respect, the unemployment rate is a lagging indicator.

A: A bulge in jobless claims usually forecasts declining employment and rising unemployment, but we do not use the initial claims numbers in determining our chronology, partly because of noise in that data series.

Q: How do the cyclical fluctuations in the unemployment rate relate to the NBER business-cycle chronology?

In the recession beginning in December 2007 and ending in June 2009, real GDP declined in the first, third, and fourth quarters of 2008 and in the first quarter of 2009.

The committee places real Gross Domestic Income on an equal footing with real GDP; real GDI declined for six consecutive quarters in the recent recession.The differences between these two sets of estimates were particularly evident in the recessions of 20-2009.Q: How does the committee weight employment in determining the dates of peaks and troughs? In the 2007-2009 recession, the central indicators–real GDP and real GDI–gave mixed signals about the peak date and a clear signal about the trough date.In the 2001 recession, we found a clear signal in employment and a mixed one in the various measures of output.Consequently, we picked the peak month based on the clear signal in employment, as well as our consideration of output and other measures.A: Personal income comes from Table 2.6 of the National Income and Product Accounts, less personal current transfer receipts from the same table, deflated by a monthly interpolation of the price index for gross domestic product, NIPA Table 1.1.9. The committee also considered new estimates of monthly real GDP and GDI constructed by two committee members, James Stock and Mark Watson (available here).

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