Official Dates for Business Cycles: Don't Capture All the Ups and Downs
Wall, Howard J., Regional Economist
Those who want a complete picture of business cycles should look beyond the dates determined by the National Bureau of Economic Research for the starts and ends of recessions and expansions. The NBER's Business Cycle Dating Committee provides a good snapshot of the broad aggregate economy, but the committee's methodology overlooks other related business cycles that are also important.
Although the NBER determines recession dates by evaluating a variety of different measures of economic activity, the dates are closely aligned with movements of the broadest measure, gross domestic product. As is well-known, however, recent NBER recessions have not been in synch with periods of recession in the labor market. The NBER said the latest recession to hit the country started in March 2001 and ended in November 2001. According to a forthcoming study to be published by the St. Louis Fed, the U.S. labor market entered recession in May 2000-nearly a year before the start of the NBER recession -and exited recession in November 2003-a full two years after the end of the NBER recession.1
A second interesting characteristic of the business cycle that is missed by the NBER, and by anyone who focuses solely on national-level data, is the geographic pattern of state-level recessions and expansions.2 The last two recessions, in particular, each had a strong geographic element. Many coastal states went into recession well before the NBER recession began in July 1990 and did not leave recession until well after the NBER recession ended in March 1991. The most recent recession had the opposite pattern: States in the middle of the country tended to enter recession earlier than the country as a whole and tended to be the states that exited recession later than the country as a whole.
The experiences of the seven states wholly or partly in the Eighth Federal Reserve District provide a good illustration of the diversity of state-level experience during the period surrounding the most recent recession.
Except for Illinois, every District state entered into labor-market recession earlier than the country did. Mississippi's recession began the earliest, in August 1999, nine months before the country's labor-market recession began and six months before Missouri's. At the other extreme, Illinois' labor-market recession began one month after the country's did, while those of the remaining states began one to three months before the country's. …