On April 30, the Bureau of Economic Analysis (BEA) will release the advance National Income and Product Account (NIPA) estimates for the first quarter. Based on the latest data, we think that the estimates will show that the economy remained weak in the first quarter, but still eked out a small gain.

 Unless the BEA surprises us with strong numbers, we still think that the National Bureau of Economic Research (NBER) Business Cycle Dating Committee will eventually rule that the U.S. economy slipped into recession during the first quarter. We base this on recent weakness across several fronts, including the four series that the committee tracks to determine turning points in business cycles.

The NBER's Business Cycle Dating Committee is a group of seven economists affiliated with the NBER that set business-cycle turning points. In declaring recessions, the committee is an economist's version of the Supreme Court, since nearly every professional economist accepts its decision as the final word on the matter. The committee can take up to 18 months before issuing a ruling, because calling a turning point is not always a clear-cut matter and because of data revisions. 

According to the committee, "A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough."

The committee views "real GDP as the single best measure of aggregate economic activity." Because GDP is calculated quarterly, and the committee's chronology is monthly, it focuses on four measures of monthly activity: nonfarm employment, personal income less transfer payments (adjusted for inflation), industrial production, and real manufacturing and trade sales.

At this moment, these four series are painting a mixed picture of the economy. All four are running below peak values. Two are slipping, and two are flat.

Nonfarm employment—the most important indicator—has decreased during the past three months, after peaking in December 2007 at 138,078,000. Over last year, it had been rising progressively less and less. In March, it was down to 137,846,000, and the downward trend in payroll employment should continue in April.

Growth in industrial production (the output of the nation's factories, mines, and utilities) underwent a rocky deceleration during late 2007 and has clearly slowed down. After a drop in February and a small March rebound, it is barely above its July 2007 level. If it trends downward from here, it will have peaked in January, but it is far too early to make a call that this was a cyclical peak.

Wholesale-retail trade dropped consecutively during November and December 2007 and then rebounded a little in January (the February data will not be available until May 1). If the rebound does not continue, then this measure may have hit a business-cycle peak of $986.6 billion in October 2007.

Real income has reached a plateau and appears relatively flat, just below $8,513.5 billion, where it had hovered since September 2007. It had previously recovered from a dip in the first half of 2007.

The four series are not weak enough to make a definitive recession call, which will depend on what happens going forward. Based on the latest data, we think that the economy will eke out about 0.5% growth (annualized) in the first quarter, propped up by an unwanted inventory accumulation. But inventories will become a drag on growth during the second quarter, which will help push GDP into reverse. As a result, Global Insight expects industrial production, employment, and real personal income (less transfers) to retreat during the first half of 2008; we do not forecast the real wholesale-retail trade series, but this number is also likely to deteriorate).

On March 15, Martin Feldstein, the former president of the NBER and a current committee member, said for the first time that the U.S. economy had slipped into recession. Jeffrey Frankel, another committee member, said on April 5, "The odds that it will turn out that a recession started in the early part of this year have certainly been rising." But Robert Gordon said in the same Reuters story there was "no sign that a recession has begun yet."

If the economy fell into recession, the committee will likely call December 2007—the month that employment peaked—the turning point. If this is so, the latest expansion would have lasted 73 months, ranking fourth longest among the 11 postwar business expansions.