- The Washington Times - Thursday, November 1, 2001

The popular definition of recession is two quarters of decline in economic output, as seen in yesterday's report from the Commerce Department. But it's actually more complicated than that.
A report on job losses due out from the Labor Department tomorrow is likely to be more crucial in determining whether the United States is in recession, according to the Cambridge, Mass., committee of economists, whose job it is to officially designate the start and end of recessions.
"A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade." said the six prominent economists on the National Bureau of Economic Research's business cycle-dating committee, in a recent statement explaining what they do.
A recession begins just after the economy reaches a peak of output and employment and ends as the economy reaches its trough," the committee said. "Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades."
The most important economic statistic scrutinized by the group, which is headed by former Reagan economic adviser Martin Feldstein, is a figure on the number of jobs created or eliminated by U.S. businesses contained in the Labor Department's monthly employment report.
Despite the loss of more than a half-million jobs since April shown in that report, the committee has declined so far this year to say the economy is recession, arguing that most of the job losses have been confined to manufacturing.
Another indicator closely watched by the committee industrial production has clearly been in recession since last year, and in fact already has fallen further than it did during the 1990-91 recession. But the committee said the downturn in manufacturing and technology has not been broad enough to qualify as a recession.
Another key indicator followed by the committee has not turned down at all that is, personal incomes, adjusted to exclude both inflation and transfer payments from the government such as welfare, Social Security and unemployment benefits.
Many economists believe all that will change with tomorrow's employment report, which is expected to show a loss of 300,000 jobs and declining wages across a broad swath of the economy.
If the employment report is as glum as expected, the Cambridge committee may decide to convene a meeting to mark the onset of a recession. Many economists say that, given the loss of jobs since April, the committee ultimately may decide that the recession started last spring rather than with the summer decline in output seen in yesterday's Commerce Department report.

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