Determination of the December 2007 Peak in Economic Activity
Version of December 11, 2008
The Business Cycle Dating Committee of the National Bureau of Economic Research met by
conference call on Friday, November 28. The committee maintains a chronology of the
beginning and ending dates (months and quarters) of U.S. recessions. The committee determined
that a peak in economic activity occurred in the U.S. economy in December 2007. The peak
marks the end of the expansion that began in November 2001 and the beginning of a recession.
The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.
A recession is a significant decline in economic activity spread across the economy, lasting more
than a few months, normally visible in production, employment, real income, and other
indicators. A recession begins when the economy reaches a peak of activity and ends when the
economy reaches its trough. Between trough and peak, the economy is in an expansion.
Because a recession is a broad contraction of the economy, not confined to one sector, the
committee emphasizes economy-wide measures of economic activity. The committee believes
that domestic production and employment are the primary conceptual measures of economic
The committee views the payroll employment measure, which is based on a large survey of
employers, as the most reliable comprehensive estimate of employment. This series reached a
peak in December 2007 and has declined every month since then.
The committee believes that the two most reliable comprehensive estimates of aggregate
domestic production are normally the quarterly estimate of real Gross Domestic Product and the
quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic
In concept, the two should be the same, because sales of products generate income for
producers and workers equal to the value of the sales.
However, because the measurement on
the product and income sides proceeds somewhat independently, the two actual measures differ
by a statistical discrepancy. The product-side estimates fell slightly in 2007Q4, rose slightly in
2008Q1, rose again in 2008Q2, and fell slightly in 2008Q3. The income-side estimates reached
their peak in 2007Q3, fell slightly in 2007Q4 and 2008Q1, rose slightly in 2008Q2 to a level
below its peak in 2007Q3, and fell again in 2008Q3. Thus, the currently available estimates of
quarterly aggregate real domestic production do not speak clearly about the date of a peak in
Other series considered by the committee—including real personal income less transfer
payments, real manufacturing and wholesale-retail trade sales, industrial production, and
employment estimates based on the household survey—all reached peaks between November
2007 and June 2008.
The committee determined that the decline in economic activity in 2008 met the standard for a