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Where the trough sits in the cycle
A business cycle runs through two phases. The period from a peak to a trough is a contraction, which the NBER calls a recession. The period from a trough to the next peak is an expansion. The peak is the high point where activity stops rising and begins to fall. The trough is the mirror image: the low point where falling activity stops and rising activity starts.
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Because the trough is the boundary between the two phases, it is the single most important date in a recession’s history. Knowing it tells you when the decline ended, not how far the economy has come since.
How the NBER identifies a US trough
The NBER Business Cycle Dating Committee maintains the US chronology. It does not apply a fixed formula. Its traditional definition of a recession is a significant decline in economic activity that is spread across the economy and lasts more than a few months. The committee judges three things together:
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- Depth: how far real activity has fallen.
- Diffusion: how widely the decline is spread across sectors and regions.
- Duration: how long the decline lasts.
These criteria can partly offset one another. A decline that is unusually deep can be dated as a recession even if it is short, and a long but shallow slide can also qualify. The committee weighs them as a whole rather than checking each one against a threshold.
The NBER also avoids relying on a single series. It looks at a range of monthly measures of aggregate real activity, including:
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- real personal income less transfers
- payroll employment and household employment
- real personal consumption
- manufacturing and trade sales, adjusted for prices
- industrial production
Individual series can turn at different times. The national trough date summarizes broad activity across these measures, so a particular indicator may turn earlier or later than the official date.
Why the trough is dated after the fact
The NBER waits until enough data are available to avoid major revisions to the chronology. As a result, a trough is usually announced months or years after it happens. The date is a monthly classification. It does not identify the exact day the economy changed direction.
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The month counting convention
Under the NBER’s convention, the month after the peak is the first recession month, and the trough month is the last recession month. The first month of the following expansion is the month after the trough. This is why a recession’s length is counted in whole months from the peak to the trough.
Why the two-quarter GDP rule is not the NBER’s test
Many readers know the shortcut that a recession means two consecutive quarters of falling real GDP. That shortcut is widely repeated, but it is not the NBER’s definition. The committee uses a broader judgment based on depth, diffusion, and duration across multiple indicators. A period can meet the NBER’s standard without matching the GDP rule, and a short GDP dip does not automatically become a recession under the NBER’s method. If you see the two-quarter rule described as the official definition, treat that description as a simplification.
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A trough is not a full recovery
The word “expansion” describes activity that is rising after the trough. It does not mean output, employment, or income has already climbed back to the previous high. The NBER’s September 20, 2010 announcement on the June 2009 trough made this explicit. It said that ending the recession did not mean that conditions were favorable or that the economy had returned to normal capacity.
Labor-market measures can lag the aggregate turn. The NBER’s own FAQ gives the example of the recovery that began in March 1991. Unemployment kept rising for 15 months after that trough. A reader who looks only at unemployment would therefore misjudge when the expansion began, and a reader who looks only at the trough would misjudge how hard the labor market still was.
Peak, trough and recovery compared
| Turning point | What it signals | What it does not signal |
|---|---|---|
| Peak | Transition from expansion to contraction. The month after the peak is the first recession month. | Not a sign of a crash. Activity can fall gradually at first. |
| Trough | Transition from contraction to expansion. The trough month is the last recession month. | Not a return to the previous high, and not proof that unemployment is falling. |
| Recovery to the prior peak | Activity has climbed back to its earlier high. | Not the same event as the trough. It can take considerably longer to occur. |
A historical example: the June 2009 trough
The NBER designated June 2009 as the trough of the US business cycle. That date ended the recession that began in December 2007 and started the expansion that followed. The committee reported that the recession lasted 18 months (National Bureau of Economic Research, 2010).
This example is historical. It shows how the trough date works, but it does not describe current economic conditions. For the most recent US peak and trough, check the NBER’s chronology directly, because the latest turning points are the ones most likely to be revised or newly announced.
How to read a trough date correctly
- Treat the trough as the end of the decline in aggregate activity, not the end of hardship.
- Expect unemployment, incomes and sector data to lag or turn at different times.
- Do not equate the trough with the moment the economy was fixed.
- Remember that the NBER chronology covers US business cycles. It does not date the cycles of other countries.
Official wording on the trough
The NBER’s September 20, 2010 announcement puts the concept plainly: “The trough marks the end of the declining phase and the start of the rising phase of the business cycle.” The NBER’s Business Cycle Dating Procedure FAQ adds that “a month is designated as a trough when economic activity reaches a low point and begins to rise again for a sustained period.”
The “sustained period” language is important. A single month of improvement does not establish a trough, which is one reason the committee dates these turns retrospectively.
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Summary of the key distinctions
The trough is a directional turning point in aggregate activity, identified retrospectively by the NBER through depth, diffusion and duration, and it is followed by an expansion that may still leave output and jobs below their former highs.
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