Sag in nation's output appears milder than usual in this recession
Gross national product in the United States in constant dollars, so-called real GNP, the measure of the production of the nation's total goods and services , may be holding up better than usual during the current recession.
''May be'' seems appropriate, because GNP has not moved in conformity with other economic indicators in the post-World War II years. Thus, as unusual as it may seem, it is not clear whether the weakness in GNP associated with the current recession has been going on for one quarter or three.
By dating GNP at the middle month of a quarter, it reaches highs as early as 2, 4, 5, even 9 months before recessions have begun during the postwar years, and reaches lows 1, 2, 3, 5, and 9 months before recessions have ended. (The 9 -month lead at a high is based on an August 1974 peak date for the economy, not the questionable so-called official peak, November 1973.)
This time the economy peaked last July, after which a recession began. The GNP reached a high in first-quarter 1981, five months before July; fell modestly in 2nd-quarter 1981; then regained virtually all of that loss in third-quarter 1981, to return to within a fraction of the first-quarter 1981 level. In fourth-quarter 1981, it fell fairly sharply. The question is whether the GNP weakness associated with the recession began after the first or third quarters of 1981.
Technically, it began after the first quarter, because that was fractionally higher than the third-quarter level.
After its first three months of weakness this time, GNP today was doing better than in all but one previous recession (1960). After six months, GNP today was doing better than in any previous recession. After nine months, GNP today was doing better than in three previous recessions and the same as in 1960 .
Averaging GNP nine months after each of the seven previous recessions shows that it fell 1.6 percent below its peak. GNP after nine months of weakness this time has fallen only 1.2 percent, performing somewhat better than average. Such percentages may seem small, but for GNP such a difference is significant.
But what if we decide the recession-associated weakness in GNP began after third-quarter 1981 rather than after first-quarter 1981?
The average GNP recession weakness in the postwar years has been 1.1 percent in the first three months of recession. This recession the weakness is 1.2 percent.
Similar studies of other major measures of the economy, where a comparison of performances for the months corresponding directly to today's July 1981 to December 1981 recession is made, show the current recession is proceeding pretty much in an average fashion. Thus, the selection of the first-quarter 1981 through fourth-quarter 1981 performance of GNP seems to be the more appropriate for measuring its recession behavior.
If so, the current recession, as measured by GNP, is not, thus far, a severe one.
If GNP falls for one more quarter, however, the situation would change. After nine months of recession in the past, usually GNP has already ended its decline and started upward. This occurred in five of the seven previous recessions.
Prospects for another quarterly decline in GNP are strong, even if the economy as reflected in monthly economic measures starts to move upward in the first quarter.
January was so weak because of the disruptions from unusually severe winter weather that even strong increases in February and March will not be sufficient for first-quarter 1982 to exceed fourth-quarter 1981.
So, GNP's recession behavior is better than average thus far; it will be worse than average after first-quarter 1982; but by then the economy could be on its way up again.
As for 1982, first-quarter GNP will be so far below 1981's average annual level that it will be close to impossible for 1982 as a whole to exceed 1981.