When Did the Recession Begin?

Hugh Cleland made an interesting observation about recession and the stock market. He noted that the NBER start date of the recession in 1990 coincided with the top in the S&P 500. Using this relationship, he conjectured that the market top in October 2007 may be the start date of the recession.

However, data from the past 7 US recessions reveal that this relationship was not repeated in any of the other 6 recessions and therefore, is a mere coincidence. So when did the recession actually start?

Below are ECRI’s official recession calls in the past:

Feb. 6, 1990 by Geoffrey Moore. Lead time = 6 months.

Mar. 26, 2001 by Anirvan Banerji. Lead time = 0 months.

Mar. 21, 2008 by Lakshman Achuthan. Lead time = ?

My own speculation is that ECRI’s recession call is late this time around. There was solid evidence for a recession call in January 2008. Unfortunately, ECRI was hoping that rapid rate cuts by the Fed could help avert a recession. They did not realize that this particular recession, driven by a deflating credit bubble, would increase the time needed for monetary stimulus to work itself into the economy.

Hence, until NBER announces the official recession dates for this cycle, I will assume that it began in January 2008.

Comments

[deaverb:]

"Takes time to work through the system, rate cuts." Simply's credit line had its interest rate cut dramatically a couple of times. That's money to do more titles in our audiobook line. My wife's ARM adjusted down last month and saved her $621.00. That's real dough--now.

2008 Mar 31 11:58 AM

[gordon:]

The leading economic indicators (LEI) are down 5 months in a row, that's RECESSION, tell CNBC, those idiot liars. Also, the GDP is a fraud because the inflation deflater is corrupt, if you grossly imput prices too low into the GDP formula, that is the PCE or CPI deflater, which is underestimated on purpose by 2.5%, that makes GDP negative for at least 2 quarters, Shadow Government Statistics show it's been negative for 4 quarters. Also, the gov't is fraudulantley including profits from overseas ,as if being manufactured here, by Americans, in the US GDP number.

2008 Mar 31 02:35 PM