Why We Don’t Call Recessions Based on Oil Use

Reader Stephen Kopitz writes:

I think 2011 could well be called a recession. This is the only time in U.S. history that oil consumption has fallen – and fallen substantially – without a so-called recession, and the next three years weren’t very good, so Summers Nov. It’s about the secular stagnation of 2013. And, of course, Europe collapsed like a ton of bricks. There will be this time too.

Here is US oil consumption (US production plus imports minus exports):

Figure 1: Total U.S. oil consumption (blue) seasonally adjusted (red) in thousands of barrels. Dotted line for 2011M02. Seasonal adjustment using Census X-13. Source: EIAand the author’s calculations.

What do some of the key indicators look like, followed by the NBER Business Cycle Dating Committee?

Figure 2: Non-agricultural employment (dark blue), industrial production (red), personal income excluding transfers 2012, $ (green), manufacturing and trade sales 2012, $ (black), consumption 2012 USD (light blue), and monthly GDP in Ch.2012 $ (pink), all logs normalized to 2020M02 = 0. NBER recession dates, from peak to trough, shaded in grey. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (née Macroeconomic Advisors) (issue 06/01/2022), NBER and author’s calculations.

What about GDP and other general indicators with a quarterly frequency? Here are the GDP and gross domestic product (average of GDP and GNI). The latter is widely regarded as a better measure of output than GDP alone (see below). Furman (2016)).

Figure 3: GDP (black) and gross domestic product (turquoise), both in billions of 2012 dollars, SAAR. Dashed line in the first quarter of 2011. Source: BEA and author’s calculations.