Defining a Recession -- and Other Economic Buzzwords --- Nonprofit Group Makes Call Based on the `Three Ds' Of Economic Downturn
WASHINGTON -- For the first time in years, the dreaded word "recession" is back as a buzzword. Oddly, though, it will be months -- or even years -- before economists know for sure if the U.S. has entered one, partly because the definition is fluid.</br></br>The most common definition of recession is two consecutive quarters of economic contraction. This was the explanation President Clinton used to defend his legacy when reporters asked whether President-elect George W. Bush was inheriting a Clinton recession.</br></br>But that definition isn't widely embraced by economists. "Economic growth is sort of more on a continuum, there's nothing special about zero," says Harvard University economist Greg Mankiw. His introductory economics textbook, "Principles of Economics," defines a recession more generally as "a period of declining real incomes and rising unemployment." In some cases, he says, two quarters may be too much. "If you had a big enough fall in one quarter, you'd probably call that a recession, too," he says.</br></br>For professional economists, the ultimate arbiter of economic peaks and troughs is the National Bureau of Economic Research's Business Cycle Dating Committee. "Basically, a recession is whatever they want to call a recession," says Mr. Mankiw.</br></br>The NBER is a nonpartisan, nonprofit think tank devoted to promoting the understanding of how the economy works. Founded in 1920 and based in Cambridge, Mass., the NBER has been dating expansions and recessions for decades. At their Web site (www.nber.org), readers can examine the ebb and flow of U.S. economic growth back to 1854.