What It Measures
The NBER Recession Indicator (USREC) is a binary variable that equals 1 during months that the National Bureau of Economic Research has designated as recession periods, and 0 otherwise.
- The NBER defines a recession as "a significant decline in economic activity that is spread across the economy and lasts more than a few months." They consider multiple indicators including:
- Real personal income less transfers
- Nonfarm payroll employment
- Real personal consumption expenditures
- Wholesale-retail sales adjusted for price changes
- Industrial production
- Household survey employment
Why It Matters
Official Recession Dating: NBER is the authoritative source for U.S. recession timing.Historical Context: Allows comparison of current conditions to past recession periods.Market Patterns: Helps identify market behavior patterns during economic contractions.Policy Response: Fed and fiscal policymakers respond aggressively to recessions.
How to Interpret
Binary Signal: 1 = recession, 0 = expansion. No partial values.Lagged Announcement: NBER typically announces recessions 6-12 months after they begin and end.Duration Varies: Recessions have lasted from 6 months (2020) to 18 months (2007-2009).Not a Predictor: This is a historical indicator, not a forecast. Use yield curve, claims, etc. for prediction.
Key Levels to Watch
| Level | Interpretation |
|---|---|
| 1 | Economy is in recession |
| 0 | Economy is in expansion |
Historical Context
Since 1990, the U.S. has experienced four recessions: July 1990-March 1991, March 2001-November 2001, December 2007-June 2009 (Great Recession), and February 2020-April 2020 (COVID). The COVID recession was the shortest on record at just 2 months.