If This Is a Recession, We Might Not Know for Months

Economy’s second-straight decline in output sparks debate—and the waiting game

GDP, change from previous quarter

Financial crisis

Covid-19 recession

Other recessions

2001 recession

40

%

30

20

10

0

–10

–20

–30

–40

1980

'90

2000

'10

'20

Other

Recessions

2001

recession

Financial

crisis

Covid-19

recession

40

%

30

20

10

0

–10

–20

–30

–40

1980

'90

2000

'10

'20

2001

recession

Financial

crisis

Covid-19

recession

Other recessions

40

%

30

20

10

0

–10

–20

–30

–40

1980

'90

2000

'10

'20

Other

Recessions

2001

recession

Financial

crisis

Covid-19

recession

40

%

30

20

10

0

–10

–20

–30

–40

1980

'90

2000

'10

'20

Other

Recessions

Financial

crisis

40

%

30

2001

recession

Covid-19

recession

20

10

0

–10

–20

–30

–40

1980

'90

2000

'10

'20

Note: Seasonally adjusted at annual rates

Source: Commerce Department

By Andrew Barnett and Ming Li

As the Federal Reserve continues to raise interest rates in its fight against the highest inflation in more than four decades, economic indicators flash signs of a slowdown and questions abound over what is a recession and whether the U.S. has entered one.

U.S. gross domestic product fell by an inflation and seasonally adjusted annual rate of 0.9% in the second quarter, the Commerce Department said Thursday. It was the economy’s second-consecutive quarterly contraction, which is one definition of recession, though not the one used by the official arbiter, the National Bureau of Economic Research.

The nonprofit academic group’s Business Cycle Dating Committee tracks an array of measures in addition to GDP to identify the timing of peaks and troughs within cycles of economic activity. These peaks and troughs represent transitions between economic expansions and contractions.

We often don’t know when a recession begins or ends until months later, when the committee makes the call.

The group takes a deliberate, retrospective approach in making these announcements to avoid the need for revisions. Since the committee was created in 1978, there have been six recessions. The starts to the downturns have been announced from four months to a year after they happened.

The end of recessions in some cases have taken longer to call. As with peaks, the committee tends to wait a number of months to identify a trough after it has occurred.

Duration of recessions since 1980, with timing of announcements

1980 RECESSION

1981-82 RECESSION

1990-91 RECESSION

Start

Jan. 1980

July

1981

July

1990

Start

announced

June 1980

Jan.

1982

April

1991

End

July 1980

March

1991

Nov.

1982

End

announced

July 1981

July

1983

Dec.

1992

2001 RECESSION

2007-09 RECESSION

COVID-19 RECESSION

March 2001

Dec. 2007

Feb. 2020

June

2020

Nov.

2001

April

2020

Dec.

2008

Nov.

2001

July

2021

June

2009

July

2003

Sept.

2010

Note: Announcements are plotted by the month in which they were made, not the precise date.

Source: National Bureau of Economic Research

Duration of recessions since 1980, with timing of announcements

1980 RECESSION

1981-82 RECESSION

1990-91 RECESSION

Start

Jan. 1980

July

1981

July

1990

Start

announced

June 1980

Jan.

1982

April

1991

End

July 1980

March

1991

Nov.

1982

End

announced

July 1981

July

1983

Dec.

1992

2001 RECESSION

2007-09 RECESSION

COVID-19 RECESSION

March 2001

Dec. 2007

Feb. 2020

June

2020

Nov.

2001

April

2020

Dec.

2008

Dec.

2001

July

2021

June

2009

July

2003

Sept.

2010

Note: Announcements are plotted by the month in which they were made, not the precise date.

Source: National Bureau of Economic Research

Duration of recessions since 1980, with timing of announcements

1980 RECESSION

1981-82 RECESSION

1990-91 RECESSION

Start

Jan. 1980

July

1981

July

1990

Start

announced

June 1980

Jan.

1982

April

1991

End

July 1980

March

1991

Nov.

1982

End

announced

July 1981

July

1983

Dec.

1992

2001 RECESSION

2007-09 RECESSION

COVID-19 RECESSION

March 2001

Dec. 2007

Feb. 2020

June

2020

Nov.

2001

April

2020

Dec.

2008

Nov.

2001

July

2021

June

2009

July

2003

Sept.

2010

Note: Announcements are plotted by the month in which they were made, not the precise date.

Source: National Bureau of Economic Research

Duration of recessions since 1980,

with timing of announcements

1980

RECESSION

1981-82

RECESSION

1990-91

RECESSION

Start

Jan.

1980

July

1981

July

1990

Start

announced

June 1980

Jan.

1982

April

1991

End

July

1980

March

1991

Nov.

1982

End

announced

July 1981

July

1983

Dec.

1992

2001

RECESSION

2007-09

RECESSION

COVID-19

RECESSION

March

2001

Dec.

2007

Feb.

2020

June

2020

Nov.

2001

April

2020

Dec.

2008

Nov.

2001

July

2021

June

2009

July

2003

Sept.

2010

Note: Announcements are plotted by the month

in which they were made, not the precise date.

Source: National Bureau of Economic Research

Duration of recessions since 1980,

with timing of announcements

1980

RECESSION

1981-82

RECESSION

1990-91

RECESSION

Start

Jan.

1980

July

1981

July

1990

Start

announced

June 1980

Jan.

1982

April

1991

End

July

1980

March

1991

Nov.

1982

End

announced

July 1981

July

1983

Dec.

1992

2001

RECESSION

2007-09

RECESSION

COVID-19

RECESSION

March

2001

Dec.

2007

Feb.

2020

June

2020

Nov.

2001

April

2020

Dec.

2008

Nov.

2001

July

2021

June

2009

July

2003

Sept.

2010

Note: Announcements are plotted by the month

in which they were made, not the precise date.

Source: National Bureau of Economic Research

There have been 34 recessions since 1857, ranging in length from more than five years to the pandemic-driven contraction of 2020 that lasted two months.

Past recessions since 1857, sorted by duration

Start date

Months

0

12

24

36

48

60

October 1873

43 months

The Great Depression

August 1929

March 1882

April 1865

January 1910

September 1902

January 1913

1857-1979

June 1857

June 1869

1980-2022

December 1895

June 1899

January 1920

18 months

Financial crisis

December 2007

January 1893

November 1973

July 1981

May 1923

March 1887

May 1907

October 1926

May 1937

November 1948

December 1969

July 1890

July 1953

April 1960

October 1860

February 1945

August 1957

July 1990

8 months

2001 recession

March 2001

August 1918

January 1980

2 months

Covid-19 recession

February 2020

Start date

Months

0

12

24

36

48

60

October 1873

43 months

The Great Depression

August 1929

March 1882

April 1865

January 1910

September 1902

January 1913

1857-1979

June 1857

June 1869

1980-2022

December 1895

June 1899

January 1920

18 months

Financial crisis

December 2007

January 1893

November 1973

July 1981

May 1923

March 1887

May 1907

October 1926

May 1937

November 1948

December 1969

July 1890

July 1953

April 1960

October 1860

February 1945

August 1957

July 1990

8 months

2001 recession

March 2001

August 1918

January 1980

2 months

Covid-19 recession

February 2020

Start date

Months

0

12

24

36

48

60

October 1873

43 months

The Great Depression

August 1929

March 1882

April 1865

January 1910

September 1902

January 1913

1857-1979

June 1857

June 1869

1980-2022

December 1895

June 1899

January 1920

18 months

Financial crisis

December 2007

January 1893

November 1973

July 1981

May 1923

March 1887

May 1907

October 1926

May 1937

November 1948

December 1969

July 1890

July 1953

April 1960

October 1860

February 1945

August 1957

July 1990

8 months

2001 recession

March 2001

August 1918

January 1980

2 months

Covid-19 recession

February 2020

Start date

Months

0

12

24

36

48

60

October 1873

August 1929

March 1882

April 1865

43 months

The Great Depression

January 1910

September 1902

January 1913

1857-1979

June 1857

June 1869

1980-2022

December 1895

June 1899

January 1920

18 months

Financial crisis

December 2007

January 1893

November 1973

July 1981

May 1923

March 1887

May 1907

October 1926

May 1937

November 1948

December 1969

July 1890

July 1953

April 1960

October 1860

February 1945

August 1957

July 1990

8 months

2001 recession

March 2001

August 1918

January 1980

2 months

Covid-19 recession

February 2020

Start date

Months

0

12

24

36

48

60

October 1873

August 1929

March 1882

April 1865

43 months

The Great Depression

January 1910

September 1902

January 1913

1857-1979

June 1857

June 1869

1980-2022

December 1895

June 1899

January 1920

18 months

Financial crisis

December 2007

January 1893

November 1973

July 1981

May 1923

March 1887

May 1907

October 1926

May 1937

November 1948

December 1969

July 1890

July 1953

April 1960

October 1860

February 1945

August 1957

July 1990

8 months

2001 recession

March 2001

August 1918

January 1980

2 months

Covid-19 recession

February 2020

Source: National Bureau of Economic Research

Recessions have become more infrequent in recent decades. There have been just three since the start of the century.

U.S. recessions

Covid-19 recession

1860

'70

'80

'90

1900

'10

'20

'30

'40

'50

'60

'70

'80

'90

2000

'10

'20

Source: Federal Reserve Bank of St. Louis

U.S. recessions

Covid-19 recession

1860

'70

'80

'90

1900

'10

'20

'30

'40

'50

'60

'70

'80

'90

2000

'10

'20

Source: Federal Reserve Bank of St. Louis

U.S. recessions

Covid-19 recession

1860

'70

'80

'90

1900

'10

'20

'30

'40

'50

'60

'70

'80

'90

2000

'10

'20

Source: Federal Reserve Bank of St. Louis

U.S. recessions

Covid-19 recession

1860

1900

2000

'20

Source: Federal Reserve Bank of St. Louis

U.S. recessions

Covid-19 recession

1860

1900

2000

'20

Source: Federal Reserve Bank of St. Louis

The NBER’s definition of a recession isn’t cut-and-dried and leaves room for interpretation. The group loosely defines it as a “significant decline in economic activity that is spread across the economy and lasts more than a few months,” a phrase that can be shortened to three single-word criteria: “depth, diffusion and duration.”

The 2020 recession was the shortest on record and didn’t quite check the third box of “more than a few months,” with a peak occurring in February 2020 and a trough just two months later.

NBER ultimately concluded that the severity of conditions related to the first two criteria—the “depth” and “diffusion”—offset the relative lack of duration. The decline in economic activity early in the pandemic 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.”

NBER assesses a range of indicators in making calls about the beginning and end of business cycles. They include employment, personal income, consumer spending, manufacturing and industrial production, as well as GDP.

Over the past year, growth has slowed in personal income and also manufacturing, a trend roughly similar to those in the 12-month periods preceding the past three recessions.

Economic indicators for the 12 months preceding each recession compared with the most recent 12 months

Real personal income, change from a year earlier*

Real manufacturing and trade Industries sales, change from a year earlier†

6

%

6

%

12 months preceding the 2001

recession

4

2001

2007–09

Most recent

12 months

4

2

2007–09

0

2

2020

–2

2020

–4

0

1

6

12

1

6

12

MONTHS

Real personal income, change from a year earlier*

Real manufacturing and trade Industries sales, change from a year earlier†

6

%

6

%

12 months preceding the 2001

recession

4

2001

2007–09

Most recent

12 months

4

2

2007–09

0

2

2020

–2

2020

–4

0

1

6

12

1

6

12

MONTHS

Real personal income, change from a year earlier*

Real manufacturing and trade Industries sales, change from a year earlier†

6

%

6

%

12 months preceding the 2001

recession

4

2001

2007–09

Most recent

12 months

4

2

2007–09

0

2

2020

–2

2020

–4

0

1

6

12

1

6

12

MONTHS

Real personal income, change from a year earlier*

12 months preceding the 2001

recession

6

%

Most recent

12 months

4

2007–09

2

2020

0

1

6

12

MONTHS

Real manufacturing and trade Industries sales, change from a year earlier†

6

%

4

2001

2007–09

2

0

2020

–2

–4

1

6

12

Real personal income, change from a year earlier*

12 months preceding the 2001

recession

6

%

Most recent

12 months

4

2007–09

2

2020

0

1

6

12

MONTHS

Real manufacturing and trade Industries sales, change from a year earlier†

6

%

4

2001

2007–09

2

0

2020

–2

–4

1

6

12

*Seasonally adjusted at annual rates; latest 12-month data through June. †Seasonally adjusted; latest 12-month data through May. Note: Personal income excludes current transfer receipts.

Source: Federal Reserve Bank of St. Louis

Growth remains relatively strong in other areas, such as industrial production, which is above levels in the run-ups to the past three recessions. The number of people employed also has grown faster than it did in those periods, though it remains below prepandemic levels.

Economic indicators for the 12 months preceding each recession compared with the most recent 12 months

Industrial production, change from a year earlier

Employment level,

change from a year earlier

6

%

8

%

12 months preceding the 2001

recession

Most recent

12 months

6

4

4

2

2007–09

2001

0

2

–2

2020

2020

2007–09

–4

0

1

6

12

1

6

12

MONTHS

Industrial production, change from a year earlier

Employment level,

change from a year earlier

6

%

8

%

12 months preceding the 2001

recession

Most recent

12 months

6

4

4

2

2007–09

2001

0

2

–2

2020

2020

2007–09

–4

0

1

6

12

1

6

12

MONTHS

Industrial production, change from a year earlier

Employment level,

change from a year earlier

6

%

8

%

12 months preceding the 2001

recession

Most recent

12 months

6

4

4

2

2007–09

2001

0

2

–2

2020

2020

2007–09

–4

0

1

6

12

1

6

12

MONTHS

Industrial production, change from a year earlier

8

%

12 months preceding the 2001

recession

Most recent

12 months

6

4

2

2007–09

0

–2

2020

–4

1

6

12

MONTHS

Employment level,

change from a year earlier

6

%

4

2001

2

2020

2007–09

0

1

6

12

Industrial production, change from a year earlier

8

%

12 months preceding the 2001

recession

Most recent

12 months

6

4

2

2007–09

0

–2

2020

–4

1

6

12

MONTHS

Employment level,

change from a year earlier

6

%

4

2001

2

2020

2007–09

0

1

6

12

Note: Seasonally adjusted; latest 12 months through June

Source: Federal Reserve Bank of St. Louis

On Wednesday, Federal Reserve Chairman Jerome Powell told reporters that he doesn’t believe the U.S. is in a recession. He pointed to strength in the labor market, saying, “2.7 million people hired in the first half of the year, it doesn’t make sense that the economy would be in recession.”

Mr. Powell made the remarks a day before the release of the GDP report, but said that subsequent readings can diverge from initial estimates. “Generally the GDP numbers do have a tendency to be revised pretty significantly,” he said. “You tend to take first GDP reports with a grain of salt.”

Write to Andrew Barnett at andrew.barnett@dowjones.com and Ming Li at ming.li@wsj.com