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March 21, 2008

When will we know if it's a recession?

Some economists think we're in a recession, while others disagree. When will we know for sure? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, unfortunately we won't know for a while. In fact, we likely won't know until the recession is over if, indeed, there is a recession. The reason is that there is actually a group outside the federal government - it's a nonpartisan group called the National Bureau of Economic Research - that is actually charged with making the call on a recession. They determine if we're in a recession. They determine when a recession begins, when it ends, how bad it is. And of course to do this, they look at evidence, a lot of statistical evidence about the economy. The rule of thumb is we have to have a broad retreat - negative growth, if you will - in the economy for at least six months. Now the problem is that the data that these folks need to make the determination about a recession comes out with a substantial lag. Many of the data come out three or four months after the fact, so it's going to be a while, for example, to see if we meet that six-month criteria for having a retreat in the economy. It's going to be a while before all those data are here, which means as in past recessions, we'll know if it's a recession, but only after the fact."

Posted by Dave at March 21, 2008 08:29 AM