for: The Recession

In economics, a recession is a general slowdown in economic activity in a country over a sustained period of time, or a business cycle contraction. During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes and business profits all fall during recessions.

Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.

Identifying

In a 1975 New York Times article, economic statistician Julius Shiskin suggested several economic indicators that identify a recession; these indicators included the rule 'two successive quarterly declines in GDP'. Over time, the other rules have been largely forgotten, and a recession is now often identified as a period when a country's GDP falls (negative real economic growth) for at least two quarters. Some economists prefer a more robust definition of a 1.5% rise in unemployment within 12 months.

In the United States the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER defines an economic recession as: "a significant decline in 1 economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales." Almost universally, academics, economists, policy makers, and businesses defer to the determination by the NBER for the precise dating of a recession's onset and end.

Attributes

expand: date=March 2009

A recession has many attributes that can occur simultaneously and can include declines in coincident measures of activity such as employment, investment, and corporate profits.

A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to as an economic depression, although some argue that their causes and cures can be different.http://clubtroppo.com.au/2008/11/23/what-is-the-difference-between-a-recession-and-a-depression/ "What is the difference between a recession and a depression?" Saul Eslake Nov 2008

Predictors of a recession

Although there are no completely reliable predictors, the following are regarded to be possible predictors.

• In the U.S. a significant stock market drop has often preceded the beginning of a recession. However about half of the declines of 10% or more since 1946 have not been followed by recessions. In about 50% of the cases a significant stock market decline came only after the recessions had already begun.
• Inverted yield curve, the model developed by economist Jonathan H. Wright, uses yields on 10-year and three-month Treasury securities as well as the Fed's overnight funds rate. Another model developed by Federal Reserve Bank of New York economists uses only the 10-year/three-month spread. It is, however, not a definite indicator; it is sometimes followed by a recession 6 to 18 months laterFact: date=January 2009.
• The three-month change in the unemployment rate and initial jobless claims.
• Index of Leading (Economic) Indicators (includes some of the above indicators).