Are We in a Recession? The ‘Anxious Index Nowcast ’ Knows!

When the economy is in the midst of a recession, even a severe one, it can be quite difficult at first to tell. For example, as the Great Recession took hold in late 2007 and early 2008, uncertainty lingered as to whether the economy had merely slowed or was already contracting. Unfortunately for policymakers, investors, and consumers — all of whom might have been able to use such information to make better decisions regarding consumption, investment, and saving — the recession was not officially called until December 2008. Similarly, the four prior recessions were anywhere from five to nine months old before their onset was declared. 1 Since recessions are critical events affecting the national economy, being able to “nowcast ” a recession — that is, determine whether we are currently in one — would clearly be valuable. However, nowcasting recessions is not so easy. While the financial press routinely defines a recession as two consecutive quarters of a decline in the gross domestic product, the group that economists and policymakers rely on to call U.S. recessions, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), follows a broader definition: “a significant decline in economic activity that spreads across the economy, which can last from a few months to more than a year.”2 It als