The National Bureau of Economic Research’s Business Cycle Dating Committee has officially declared a recession in the U.S., starting in March 2001.

NBER notes that the expansion that began in March 1991 ended in March 2001 and a recession began. The expansion lasted exactly 10 years, the longest on the NBER’s books. A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.

A recession involves a substantial decline in output and employment. In the past six recessions, industrial production fell by an average of 4.6% and employment by 1.1%. The Bureau waits until the data shows whether or not a decline is large enough to qualify as a recession before declaring that a turning point in the economy is a true peak, marking the onset of a recession.

Employment reached a peak in March 2001 and declined subsequently. Through October, the decline in employment has been similar to the average over the first seven months of recessions. The cumulative descent is now about 0.7%, almost two-thirds of the total decline in the average recession.

Industrial production peaked in September 2000 and the index declined over the 12 months following by close to 6%, surpassing the average decline in the earlier recessions of 4.6%. The data continues to show substantial declines in real activity in manufacturing, the sector reflected in the industrial production index, and in real manufacturing and trade sales. Aggregate employment has fallen substantially as well. Among the four indicators, only income has behaved differently over the past seven months from recession averages.

The committee is satisfied that the total contraction in the economy is sufficient to merit the determination that a recession is underway. Prior to the arrival of the data for October 2001, the committee was not sure that the contraction met the criterion. With a cumulative decline in employment approaching 1% and the very large decline in industrial production, the committee has concluded that the criterion has been met now.