Commerce Department data this week found that the US economy contracted for the second consecutive quarter, sparking a new debate over whether the nation is in a recession.
Negative growth in two consecutive quarters achieves a common definition of recession – which is the official way of making such a call in some countries.
But it’s not in the US, where a relatively unseen group – the National Bureau of Economic Research’s (NBER) Business Cycle Dating Committee – is making the official call about whether the country is in a recession.
What is this group and how does it advertise?
The group within NBER that is actually advocating stagnation is the Business Cycle Dating Committee.
It has eight members, among the country’s most prominent economists, all working in top academic institutions across the country: Robert Hall of Stanford, Robert Gordon of Northwestern, James Buterba of MIT, and Valerie Ramey of MIT. University of California-San Diego, Christina Romer of UC Berkeley, David Romer of UC Berkeley, James Stock of Harvard University and Mark Watson of Princeton University.
Christina Romer served as chair of the Council of Economic Advisers under President Obama, and Puterba is chair of the National Bureau of Economic Research.
The official National Bureau of Economic Research definition of recession is broad. According to its Frequently Asked Questions page, the traditional definition of NBER is “a significant decrease in economic activity that spreads throughout the economy and lasts more than a few months.”
It takes into account the depth, spread and duration of the downturn in economic activity. While the committee’s view is that each “should be met more or less separately, the harsh conditions revealed by one standard may partially compensate for indicators that are weaker than the other.”
Economists say NBER is looking at many different indicators to make a call about whether the economy is in a recession.
“He’s actually looking at a variety of economic indicators to make this appointment,” said Alex Durante, an economist with the Tax Foundation think-tank. “They look at employment, personal income, durable goods, housing permits — so GDP is definitely part of it, but they are also looking at other indicators.”
Employment is one of the critical factors in looking at today’s economy. The US labor market is scorching hot, even after the Commerce Department found that the economy has shrunk in the past two quarters.
The White House, which has been resisting the idea of a recession, indicated that unemployment is at a historically low rate of 3.6%.
The committee found that the recession occurred in April 2020, after much of the US economy shut down at the start of the coronavirus pandemic. He concluded in July 2021 that the recession lasted two months – the shortest ever in the nation’s history.
Durante said the announcement of the current recession – if it really exists – likely won’t come until 2023.
“Obviously this is difficult for policymakers who want to stay on top of these conversations, but usually, the NBER doesn’t make the appointment until after a year,” he said. “This is because they want to make sure they have enough data, but also because the data tends to be reviewed.”
In fact, it is possible to review Commerce Department data that found the economy contracted 0.9 percent in the second quarter. It’s a drop small enough to fit the typical margin of error by which a department can correct a first draft of its forecast.
The assets of the National Bureau of Economic Research lie in the oil industry.
According to a short history of NBER written by former Vice President of Research Solomon Fabricant in 1984, the organization traces its history in part to initiatives undertaken in the early part of the 20th century by the newly formed Rockefeller Foundation, the charitable body that created the vast oil wealth that Achieved by John D. Rockefeller.
In 1914, Edwin Jay, dean of Harvard Business School, took the lead, at the request of the executive secretary of the newly established Rockefeller Foundation, in preparing a memorandum outlining the organization and functions of an institute for economic research similar to the one already established. Rockefeller Institute for Medical Research. Fabricant wrote that the proposed institute would engage in scientific and impartial investigations “of such a scale that it would be beyond the power of our current undergraduate research facilities.”
Half a century later, the Commerce Department began citing the National Bureau of Economic Research’s work on the business cycle, lending it a kind of government legitimacy, according to the Washington Post.
But NBER’s research has not been immune from controversy.
A recent Guardian investigation found that Alan Krueger, the former chair of the White House Council of Economic Advisers, received $100,000 from Uber while writing a paper published under NBER about Uber that argued it was a good job generator. Published in 2016 as part of the NBER Working Papers series, the payment disclosure has sparked academic criticism.
An NBER spokesperson said Krueger’s work as an advisor to Uber has been made public.
“The cover page of the NBER working paper revealed the fact that Alan Krueger was acting as a consultant to Uber when the paper was written, and that its co-author was an employee and shareholder of Uber. The same acknowledgments were included in the copy of the paper that was published, after peer review, by the Relationship Review industrial and labor,” said the statement emailed to The Hill.
NBER is a research organization that receives money from the government but also makes money from investments, according to its website.
“NBER’s research is supported by grants from government agencies or private foundations, by contributions from companies and individuals, and by income from the NBER investment portfolio,” the website says.
She says the groups that contribute the most to her research projects are the National Institute of Health, the National Science Foundation, the Social Security Administration and the Alfred B. Sloan Foundation.
“NBER conducts research but does not make policy recommendations or advocate on the basis of the research findings,” the group says about itself.