U.S.-based manufacturing went into its latest recession in April, and I missed it. Or did I? Once I realized my apparent oversight, I went back to the figures and realized that, although the definition of a recession that I’ve long used (two consecutive quarters of cumulative output shrinkage) is clear enough, figuring out what start date to use has been anything but throughout the current economic recovery.
For example, between April, 2018 and April, 2019, inflation-adjusted manufacturing output (the measure I’m using here, and the measure used by the Federal Reserve when it puts out its industrial production statistics each month) dropped by 0.14 percent. So even though it wasn’t down much, it was down on net for a full year – or four straight quarters.
That recession came to an end in May of this year, when industry’s after-inflation production grew by 0.25 percent on-month. But manufacturing was still mired in another recession – one that began in July. How could that be? Because between May and July of last year, price-adjusted output climbed by 0.43 percent – enough to push it back to 0.39 percent higher than the May, 2019 level. Since that time period covers more than two consecutive quarters, it qualifies as a new technical recession.
Moreover, even though between May and June of this year, constant-dollar (i.e., inflation-adjusted) manufacturing production advanced by another 0.43 percent, that still wasn’t enough to push it out of technical recession territory. The reason? Between last June and July, such output improved – by 0.43 percent itself. So since last July, it’s still down by 0.36 percent on net.
And if real manufacturing production doesn’t pick up even faster over the next few months, its current recession could continue for several more months, because last year, it continued growing healthily through December.
Interestingly, even though the U.S. economy has been in recovery mode since June, 2009, this current technical manufacturing recession is far from the first. I’ve counted five alone between January, 2012 and November, 2016. Here they are:
Jan., 2012-Oct., 2012 (down 0.22 percent)
Dec., 2012-July, 2013 (down 0.75 percent)
Aug., 2013-Jan., 2014 (down 0.01 percent)
Feb., 2014-Sept., 2016 (down 0.11 percent)
Jan., 2016-Nov., 2016 (down 0.19 percent)
In addition, those last two entries show the type of rolling, overlapping character like that seen since April, 2018. And I’ve spotted at least one more such instance – the downturn that took place between February and August of 2013, when real manufacturing output dipped by 0.04 percent.
And one more – big! – complication: Although the U.S. economy began recovering from the recession that began at the end of 2007, American manufacturing still hasn’t. Sure, it’s grown since it hit bottom (also in June, 2009). But as I’ve been pointing out ever since, it’s never grown enough to better that December, 2007 peak and in fact at present remains 2.09 percent smaller in terms of after-inflation production that at the recession’s onset. That’s more than a decade. And at its current rate of growth, the slump could easily turn eleven at the end of this year.
So getting back to my original question, is it fair to say that I missed manufacturing’s most recent recession during the current economic expansion if its post-2007 downturn never ended? As always, let me know your answers.