HispanicBusiness

On Nov. 28, the Business Cycle Dating Committee, part of the private National Bureau of Economic Research, announced its conclusion that the U.S. reached a peak in economic activity in December 2007. That condition meant that the U.S. economy had started a sustained decline and therefore had entered into a recession.

Before determining the onset of a recession, the committee has to wait, usually 6 to 18 months, because it uses several indicators to measure economic performance. The purpose is to determine if the decline in economic activity lasted more than a few months and if it is evident across all economic sectors.

The committee determines a recession has begun when the economy reaches a peak of activity and ends when the economy reaches a trough. Therefore, a recession is a broad and sustained contraction of the economy, as measured by economy-wide measures of activity. These include domestic production, evidenced by Gross Domestic Product figures, and employment, measured by company payrolls.

Recent indicators of domestic production have not clearly signaled the date of a peak in activity. By contrast, payroll employment, based on a survey of employers, reached a peak in December 2007. Payrolls have consistently declined since then, with this year's cumulative job losses reaching 1.25 million in October. Other indicators, such as personal income, wholesale and retail sales and industrial production, reached a peak between November 2007 and June 2008, while consumption, the largest portion of the economy, declined sharply in recent months.

Based on these indicators, the committee concluded that the decline in economic activity in 2008 has been significant, and that the U.S. economy has been in recession since December 2007.

Isaac Cohen is the former director of the Washington Office of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). He is a commentator on economic and financial issues for CNN en Espanol TV and radio.