Chief Economic Analyst (613-951-9162).

This is why graphs of GDP will occasionally show movements that are slightly different from the reference cycle dates. For example, the recession in the US began in December 1973 according to the NBER, but real GDP does not visibly begin to recede until mid-1974.

See P. Cross, “Alternative Measures of the Business Cycle in Canada, 1947-1992”. Canadian Economic Observer, Catalogue Number 11-010-XPB, February 1996.

Even more confusingly, in 2001 the level of real GDP at the peak identified by the NBER is below the two adjacent quarters, while GDP at the trough is higher than any other point in the recession, and higher even than at the peak itself. Noted on p.4, Edward Leamer “What’s A Recession, Anyway?” NBER Working Paper 14221, August 2008.

The NBER defines a recession as “a significant decline in economic activity spread across the economy, normally visible in production, employment, real income, and other indicators”. From the December 11, 2008 “Determination of a December 2007 Peak in Economic Activity”, www.nber.org/cycles/dec2008.html.

Cross, 1996, p. 3.13. The same principles apply to deflation, which is a process where prices for a wide range of goods and services fall due to weak demand, not a transitory dip in the CPI due to the vagaries of gasoline prices. See p. 2 of Mark Carney “Inflation Targeting in a Global Recession.” Remarks by the Governor of the Bank of Canada to the Halifax Chamber of Commerce, January 27, 2009.

P.28-29, Lakshman Achuthan and Anirvan Bonerji, “Beating the Business Cycle”. Currency Doubleday, NY, 2004.

See Hyman Minsky, “Stabilizing an Unstable Economy.” Yale University Press, New Haven Conn., 1986, p 15 and 57. Franklin National was one of four banks with over $1 billion of assets to fail during the 1974-75 recession.

Peter Van Doren and Jerry Taylor in “Time to Lay the 1973 Oil Embargo to Rest” note that gasoline shortages were rife 5 months before the embargo began, and point to price controls introduced by the Nixon Administration as the cause. From www.cato.org/pub_display.php?pub_id=3272.

The share of autos and lumber in exports remained near 30% at the peak of expansions as recently as 1999, underlining how quickly their slide has been in the last decade.

Minsky, op cit, p. 63.

Robert Hall, “How Much Do We Understand about the Modern Recession?” Brookings Papers on Economic Activity, 2:2007, p.22.

P. Cross, “Expenditure on GDP and business cycles”. Canadian Economic Observer, Catalogue Number 11-010-XPB, March 2001.

One analyst estimates that close to a quarter of financing by Canadian firms is raised in the US. See V. Klyuev, “Real Implications of Financial Linkages Between Canada and the United States.” IMF Working Paper WP/08/23.

The Fed let short-term interest rates rise early in 1982 to slow money supply growth, the focus of monetary policy at that time. As Lyle Gramley, a member of the Board of Governors, observed, “In the midst of a recession, interest rates started to go up again. That’s very unusual.” Quoted on p.448 in William Greider, “Secrets of the Temple.” Simon and Schuster, NY, 1987.

For a summary of the unfolding of the crisis, see Ben Bernanke, “The Crisis and the Policy Response”. At the Stamp Lecture, London School of Economics, January 13, 2009.

See William Watson, “OK, so how big a deficit?” Ottawa Citizen, November 11, 2008.

Robert Hall has been the only chair of the Business Cycle Dating Committee since it was formed in 1978. Interestingly, Ben Bernanke, currently chairman of the Federal Reserve Board, was a member of the committee during the 2001 recession.

Hall, op cit, p.15. Hall also found that the larger drop in employment recently was due to less hiring, not more layoffs. This continued early in the 2008 recession, although layoffs mounted after Lehman Brothers’ failure.

In the words of Barry Bosworth, a productivity expert at the Brookings Institute, “Nowadays, [companies] seem to anticipate a decline in output and lay off workers ahead of time.” Quoted by Jon Hilsenrath and Brian Blackstone, “Behind Grim Jobs Data, a Potentially Hopeful Sign”, Wall Street Journal, January 13, 2009.