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The “non-technical recession” recession of 2001


I remember sometime in May 2001, there was a conversation with the CEA staff at the time about how all the indicators were pointing to avoiding a recession. In fact, according to the oft-cited rule of thumb for two consecutive quarters of negative GDP growth, 2001 never had a recession. Consider this graph of GDP over different years:

figure 1: Gross domestic product in billions of dollars 1996 Saar. NBER defines peak and trough dates with dashed lines. 6/29/22 GDP divided by nominal GDP divided by GDP deflator, rescaled to 1996 = 100. Source: BEA via ALFRED, NBER and author’s calculations.

The preliminary GDP readings at the end of April 2001 are a relief – annualized q/q growth of about 2%:

figure 2: Quarter-on-quarter annualized real GDP growth. NBER defines peak and trough dates with dashed lines. Source: BEA via ALFRED, NBER and author’s calculations.

This positive reading remains true in the second and third versions. The pre-read data for the second quarter of 2001 was also positive. This was still the case in the second and third releases, and only in the third quarter did the read-ahead turn negative and still do. However, the advance reading for the fourth quarter (January 30, 2002) was positive – so no two consecutive quarters of negative readings.

Only after the early release in Q2 2002 (including annual revisions) did we get consecutive negative readings, in this case three quarters, starting from Q1 to Q3.The annual revision adjusts GDP estimates for the previous 5 years (see here).

However, the BEA is fully revised every five years and incorporates the latest data. This again changes the profile of GDP – as shown in Figures 1 and 2. As the most recent series shows, there have been no consecutive quarters of negative growth. However, the NBER declared a recession (peak to trough) from March 2001 to November 2001, and from the fourth quarter of 2001 to the fourth quarter of 2001 (peak to trough).Recession Bulletin November 26, 2001, Expansion Announcement, July 17, 2003).

For a previous discussion of GDP revisions, see hereand here. None of the above should be viewed as implying that GDP cannot be used to determine a recession date.In fact, Jim Hamilton’s real-time recession indicator (see this postal For extended discussion) does not rely on the most recent quarter’s data, but on the most recent quarter’s data.



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