https://www.dallasfed.org/research/economics/2022/0802
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Inspecting Individual Recession Indicators
The NBER committee’s indicators used to date business cycles include real (inflation-adjusted) personal income minus transfers, nonfarm payroll employment, employment as measured by the Bureau of Labor Statistics household survey, real personal consumption expenditures, wholesale-retail sales adjusted for price changes and industrial production.
The gray lines in Chart 1 show the movements of nonfarm payrolls and industrial production in each previous business cycle relative to the peak of that cycle (month 0 = 100); the average across all previous cycles is the black line. The 2020 COVID-19-induced recession is excluded because its cause, scale and timing were extremely atypical. The red line is the indicator’s movement between June 2021 and June 2022 relative to the level in December 2021.
The data show that employment in the overall economy and output of the industrial sector in 2022 have significantly outperformed what occurred during every previous recession at a similar point. Chart 2 repeats this exercise for an alternate source of employment (surveying households rather than businesses) and for manufacturing and trade sales.
While these indicators in 2022 (red line) are not as starkly above the gray recession lines as the indicators in Chart 1, their paths remained at the higher end of the distribution and were notably higher than the corresponding average recession paths. These indicators are also more volatile than their counterparts in Chart 1, with a wider range of recessionary outcomes.
Finally, Chart 3 shows a similar pattern as Chart 2 for real consumption and real personal income excluding transfers.
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Low Unemployment Rate Is Also Argument Against Recession
While not listed among the indicators considered by the NBER committee, the unemployment rate is also among the indicators pointing to labor market strength through the first half of 2022 (Chart 5, Panel B). It has declined from 3.9 percent in December 2021 to 3.6 percent in March 2022, where it has held steady through June. By month six, every other recession incurred an unemployment rate increase of at least 0.3 percentage points.
Increases in unemployment may also better match conceptually what is generally understood to mean a recession—an increase in slack or underutilization of resources rather than a decline in economic activity. As trend GDP growth slows due to aging demographics and slower productivity gains, there may be more frequent periods of negative GDP growth without an increase in unemployment, making the distinction between increasing slack and declining activity more relevant than in the past.
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