What Does the President Know, and When Did He Know It: "We're not in a recession..."

by: Menzie Chinn

From Reuters:

"We're not in a recession, we're in a slowdown," Bush said at a news conference at the end of a two-day summit with Canadian Prime Minister Stephen Harper and Mexican President Felipe Calderon.

This statement was made with a seemingly amazing amount of certitude. So much so that I am impelled to ask, what does the President know, and when did he get to know it? For sure, he has access to data that we do not have. And he has an army of economists to advise and inform him. So I think he must know something I don't.

His statement does give me the opportunity to update these graphs of series that the NBER places primary focus on in determining recessions.[1]

Figure 1: Log personal income less transfers in 2000Ch.$ (blue) and log nonfarm payroll employment. Real personal income calculated by subtracting off transfers from personal income, and deflating by the personal consumption expenditure deflator. NBER-defined recessions shaded gray. Source: BEA, St. Louis Fed FRED II, accessed 23 April 2008, and NBER.

Figure 2: Log industrial production (blue) and log manufacturing and trade sales, in Ch.2000$. NBER-defined recessions shaded gray.Source: Federal Reserve Board via St. Louis Fed FRED II, BEA, accessed 23 April 2008 and NBER. .

Figure 3: Log real GDP, in billions of Ch.2000$. NBER-defined recessions shaded gray.Source: Macroeconomic Advisers, accessed 23 April 2008, and NBER.

For its part, the NBER defines a recession thus:

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. ...

A "slowdown", while not explicitly defined by the President, conjures in my mind decreasing, but positive, growth rates in the indicators of economic activity. I'll let the reader decide which characterization is most apt (of course, keeping in mind the role of data revisions -- which in any case tend to be downward around (downward) turning points [2], [3]).

Other related discussion: WSJ RealTime Economics, WSJ MarketBeat.