I recall a conversation sometime in May 2001 when at the CEA where the topic was about how all the indicators are all pointing towards avoiding a recession. Indeed, using the oft-cited rule of thumb for two consecutive quarters of negative GDP growth, the 2001 recession never happened. Consider this graph of GDP for different years:
Figure 1: GDP in billion ch. 1996 $ SAAR. The NBER determined the dates of the peak and the minimum with dotted lines. 06/29/22 GDP calculated by dividing nominal GDP by GDP deflator rescaled to 1996 = 100. Source: BEA via ALFRED, NBER and author’s calculations.
The first reading of GDP at the end of April 2001 allowed people to breathe a sigh of relief – annual growth q / q was about 2%:
Figure 2: Year-on-year real GDP growth quarterly. The NBER determined the dates of the peak and the minimum with dotted lines. Source: BEA via ALFRED, NBER and author’s calculations.
This positive reading remained true through the second and third editions. Preliminary data for the second quarter of 2001 were also positive. This remained true in the second and third editions, and it wasn’t until the third quarter that the preliminary reading turned negative and stayed that way. However, preliminary data for the fourth quarter (January 30, 2002) were positive, so there were no negative figures for two consecutive quarters.
Only in the preliminary report for the second quarter of 2002, which includes an annual review, did we get consecutive negative numbers, in this case three quarters from the first to the third quarter. Annual revisions adjust GDP estimates for the previous 5 years (see chart). here).
However, BEA conducts due diligence every five years based on the latest data. This changed the contours of GDP once again, as shown in Figure 1 and Figure 2. As the most recent series show, there are no consecutive negative quarters. And yet, the NBER declared a recession lasting from (peak to trough) March 2001 – November 2001, 2001Q-2001Q4 (recession announcement November 26, 2001, expansion announcement, July 17, 2003).
For a previous discussion of changes in GDP, see hereas well as here. None of the above should be taken to mean that GDP cannot be used to determine recession dates. In fact, Jim Hamilton’s real-time recession indicator (see below). mail for extended discussion) is not based on data for the last quarter, but on the penultimate quarter.