Editor's note: This is the first in a series of stories that will look at how the economic downturn is affecting individuals throughout the country.
PALO ALTO, CALIF. — Robert E. Hall doesn't make predictions, at least not about the state of the economy. Hall is the Stanford University economist who chairs the committee charged with identifying when recessions begin and end. Over lunch at a sunny caf on the school's Mediterranean-style campus in Palo Alto, Calif., he explains it's much too early to determine whether the current slump merits the "R" word. "All the members of the committee agree we're far from a decision point," he says. Until much more evidence comes in, he prefers to call this an "experience."
It certainly is an experience for most Americans. Home prices tumble month after month. Food prices surge. Gas prices are approaching $4 a gallon. And the job market is getting rough. Given the evidence they see with their own eyes, most Americans believe the downturn is plenty clear. A recent survey by CNN (TWX) and polling firm Opinion Research found that 4 in 5 people think the economy is already in recession.
But the recession won't be official until Hall and his colleagues at the National Bureau of Economic Research say so. The NBER has been the recognized authority on dating downturns since 1961, when the U.S. Commerce Dept. began including the bureau's business cycle data in government publications. Today the NBER's business cycle dating committee has seven members, including Hall and Harvard economics professor and NBER President Martin Feldstein. The NBER is a nonprofit research group that operates independent of the government.
Ivory Tower PaceMany people think the definition of a recession is two consecutive quarters of decline in the gross domestic product. But that's a misperception. Hall and his colleagues will look beyond such simple metrics, weighing monthly GDP estimates, employment data, income, industrial production, and other factors. To call a recession, they'll look for clear signs of "a significant decline in economic activity spread across the economy, lasting more than a few months."
Any call, if it comes, is going to take a while. The NBER usually takes 6 to 18 months to decide when a recession starts or ends. Hall's committee didn't announce the end of the 2001 recession until a full 20 months after the fact.
Should they move faster? Some critics think so. This measured, academic approach is in sharp contrast to the daily lives of most Americans. While Hall and his colleagues pore over spreadsheets and statistics, most people see the economy's troubles every day, in the cost of a tank of gas, the drop in home prices, or the layoffs of a friend, neighbor, or spouse.
Members of the business cycle dating committee hail from prestigious academic institutions, from Stanford to Northwestern to Harvard. Their worlds are well-insulated from the worst of the economic troubles. On such exclusive campuses, there aren't homes foreclosed, businesses shuttered, or people homeless.
Waiting for Reliable DataHall has heard all of the questions before. He's 64 and has chaired the dating committee since it was formed in 1978. After lunch, as a soft breeze tousles his gray hair and the midday sun glints off his metal-frame glasses, he explains there are good reasons for his group's deliberate pace. First, the committee exists to identify periods of economic expansion and contraction for the historical record, not to comment on them while they're taking place. They're also not involved in policymaking, so whether they call a recession or not has nothing to do with the actions Washington may take to address problems in housing or gas prices.
No comments:
Post a Comment