Paul Krugman says we need a New Business Cycle Vocabulary. His first graph shows this point:
Official recession definitions used to correspond closely with labor market outcomes, because we had “V-shaped” recessions: when they were over, everything sprang up quickly. Here’s the employment-population ratio and recession periods from 1973 to 1990:
His second graph shows this point:
As far as the job market was concerned, the last two recessions lasted literally for years after they were officially declared over. Now we have what looks and feels like a recession that, from the point of view of the labor market, started before it officially began. The point, I think, is that the traditional definition of recession only worked well in the face of a jagged business cycle; if we now have smoother, longer curves — maybe due to better inventory management, or whatever caused the Great Moderation — the question, “Is this a recession?”, no longer means much.
Paul even has an explanation for that improvement in the labor force participation rate:
Today’s employment report wasn’t as bad as the markets seem to have thought: the big jump in the unemployment rate was due to a jump in labor force participation — maybe by teens looking for gas money? — rather than a large drop in employment. The economy still seems to be in a sort of slow-mo slump: employment gradually falling, labor markets gradually worsening, GDP positive but barely.