Comment by ConceitedCode | Hacker News Reader

Comment by ConceitedCode | Hacker News Reader

In the USA, "officially" a group of 8 economists at the National Bureau of Economic Research decides when a recession starts. I suspect other countries have their own definitions.

"The NBER's definition emphasizes that a recession involves a significant decline in economic activity that is spread across the economy and lasts more than a few months. In our interpretation of this definition, we treat the three criteria—depth, diffusion, and duration—as somewhat interchangeable. That is, while each criterion needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another. For example, in the case of the February 2020 peak in economic activity, the committee concluded that the subsequent drop in activity had been so great and so widely diffused throughout the economy that, even if it proved to be quite brief, the downturn should be classified as a recession." [1]

Planet Money (podcast on NPR) did an episode [2] a little while ago about it that I recommend listening to. They talk with one of the 8 economists. It was honestly refreshing hearing the economist talk about it, I got the impression that it was a more neutral take on the circumstances rather than pushing a narrative.

[1] https://www.nber.org/research/business-cycle-dating

[2] https://www.npr.org/2022/06/24/1107581150/recession-referees

In other words, if it looks like a recession and quacks like a recession then it might be a recession.

And yes it much more complicated - especially it also depends on how much outside pressure NEBR has. I think there is a large pressure not to declare recession since we still have a high inflation and feds needs to continue raising rates.

the reason for the weirdness is that it doesn’t look like a recession in the labor market. Layoffs have been almost exclusively limited to tech, and within tech pre-profit or highly speculative (cryptoshovels) companies. This is important because in the US economic system labor power drives income drives inflation. (This isn’t true in all countries.)

When the employment outlook changes, and I expect it will, we will be in a traditional recession.

I was under impression that unemployment is a lagging indicator. The last thing employers want to do is let people go - they will try to cut here, cut there, stop hiring etc.

What if it looks like a bug and it sounds like a humming noise?

https://www.nytimes.com/2022/07/12/opinion/employment-wages-...

That’s not what the Phantom Tollbooth told me.

My problem with that is:

> significant decline in economic activity

What is "significant"?

> more than a few months

How long exactly?

All I gather from their description is that they basically just get a "feel" for it. That's why so many people choose to follow the two negative quarter thing - it's objective and clearly defined, but maybe less accurate (particularly in cases like now where unemployment is still really low).

Both of those are up to the consensus of the group of economists. They regularly talk about it with each other and compare with historical data mostly. Keep in mind economics is a social science, not exact science.

It would strike me more as "feeling it out", but they are not in a rush to announce it is or is not a recession until they have a better feel. Everyone seems to be rushing to call it a recession as early as possible. The economist I heard talking had a "wait and see" attitude on the podcast which was refreshing to hear.

So it depends on if it's an election year and how much pressure is on them? Got it.

Of course it does. It always did at least at the margins.

I'd say listen to the economists that are actually apart of the group and form your own opinion. I didn't get that impression personally. Although I'm sure there is some impact.

You're approaching it from the standpoint that it's an exact science, but it's more of a social science and you can't really pin down exact specifics, but only best guesses. Unfortunately (and I fell into this camp for a long time) many people see economics and see the mathematical models and assume that it must be scientific or precise, but the marketing campaign to legitimize economics unfortunately confused many of us into that misconception.

It's helpful to think of economics as a field under the branch of political science, which itself isn't very scientific.

I like to think of it as not really one or the other, but as both. It’s like a venn-diagram intersection of finance and sociology. Some elements of economics are purely quantifiable, and some elements are purely human.

Economics is a social science. It is probably the most data-driven of the set, but it is inescapably human, and therefore ultimately comes down to judgment.

Has a technical recession ever not resulted in an actual recession as declared by NBER?

Great question! Not that I'm aware of (EDIT: sseagull provided a good example in 1947). To be fair, I can't think of any time where we've seen 2 quarters of negative GDP growth while maintaining "full" employment and wage growth. This is an unusual recession if it is a recession.

This is a recession. During a recession, the economy tends to lose 10% of its employment or more. Usually this is from loss of jobs. This time, inflation has cut everyone's pay by between 10 and 30% depending on who you ask. The CPI says 10%, but a lot of necessities, like energy and food, are up a lot more.

they're all unusual at the time

there are too many variables for a circumstance that doesn't happen very often for it to ever be the same

Yes. In 1947.

"And it’s rare for there to be two consecutive quarters of negative GDP without a recession. In fact, George Washington University professor Tara Sinclair said the only time on record appears to have been 1947."

From: https://www.washingtonpost.com/politics/2022/07/25/biden-adm...

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