Recessions Clearest in the Rear-View Mirror; Whether the Nation Is in One Now Depends upon Who You Ask

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When he served as vice chairman of the Federal Reserve Board, Fred Schultz was cautious about using the "R" word in public.

After all, when a high-ranking government financial official says the economy is in a "recession," it can set off a panic in the markets.

"There generally was some care used in defining the situation using that terminology," said Schultz, a Jacksonville investor who served through two recessions during his term on the Fed from 1979 to 1982.

"You're always very careful. That's the first thing I learned when I got up there," he said.

So while the economy is clearly struggling these days, you're unlikely to see any public pronouncement that we're in a recession right now. And even if government officials wanted to make a declaration, it's difficult to actually define what a recession is.

"There's not a sort of pregnancy test," said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida.

A popular definition of a recession is two consecutive quarters of declines in the nation's gross domestic product. But most economists don't rely on that.

"The problem with using that is you've been in it for at least six months before you know you're in a recession," said University of North Florida economist Paul Mason.

Most analysts consider the National Bureau of Economic Research Inc., a nonprofit, nonpartisan research organization, as the official arbiter of whether the economy is in recession. The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months."

The NBER does look at declines in GDP, but also looks at a number of other economic indicators, including data on income, employment, industrial production and wholesale and retail sales. It determines that the recession begins when the economy reaches its peak, because economic activity begins to decline after that. The recession ends when the economy falls to its trough, and economic activity begins to pick up. …


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