This column will show that the supposedly non-partisan National Bureau of Economic Research incorrectly pegged the most recent recession’s beginning as December 2007.
The timing of the recession’s inception is no trifle. NBER’s call less than a month after the 2008 presidential election made the breezy, now well-established meme that we should “blame Bush for everything” a fixture in the left’s rhetorical toolbox.
But if the economy really peaked in June of 2008 — and I will demonstrate that it did – that timing would be the noncoincidental point at which it became crystal clear that Barack Obama would turn back Hillary Clinton to become the Democrat Party’s nominee for president, and that he was a strong favorite to defeat Republican nominee John McCain.
NBER claimed in its “determination” that “domestic production and employment are the primary conceptual measures of economic activity.”
The monthly analysis of gross domestic product (GDP) done by Macroeconomic Advisers clearly shows that NBER seriously erred in evaluating its first stated component. Seasonally adjusted monthly output peaked in June 2008, reaching a level which was roughly an annualized 0.5 percent higher than in December 2007:
NBER claimed at the time that “the currently available estimates of quarterly aggregate real domestic production do not speak clearly about the date of a peak in activity.” Oh, but today’s currently available monthly estimates clearly do, and they say that the long-term decline in output didn’t begin until after June. Since NBER pointed to a single month to identify the recession’s starting point, it cannot justify ignoring Macro Advisers’ monthly analyses. (More on that later.)
As to employment, the government’s Household Survey results show that seasonally adjusted employment only dropped by 141,000 during the first four months of 2008, increasing a bit in April, before beginning to steeply decline. Because it estimates the number of self-employed and contract workers, the Household Survey is a more all-inclusive indicator of the number of people working than the Establishment Survey of payroll employment at companies, which fell more sharply during the first half of 2008, and for which NBER has an expressed but unjustifiable preference.
The other factors NBER cited mostly refute the idea that the economy’s peak was December 2007:
- “Our measure of real personal income less transfers peaked in December 2007, displayed a zig-zag pattern from then until June 2008 at levels slightly below the December 2007 peak, and has generally declined since June.”
- “Real manufacturing and wholesale-retail trade sales reached a well-defined peak in June 2008.” (How much more of an obvious admission that “we’re wrong, but we don’t care” can there be?)
- “The Federal Reserve Board’s index of industrial production … (which) excludes all services and government … peaked in January 2008, fell through May 2008, rose slightly in June and July, and then fell substantially from July to September.”
I’ll add one factor on top of that: There were year-over-year increases in monthly federal tax collections during the first seven months of 2008, including what was then a single-month record $407 billion collected in April. Many of those who made quarterly estimated income tax payments in April and to a lesser extent June were doing so on optimistic assessments that 2008 would work out to be about as good a year as 2007.
If it was going to be consistent in downplaying positive real economic growth while giving great weight to job losses as it obviously did in claiming the nation was in recession during the first half of 2008, NBER should have extended the recession’s end to September 2009.