What is a contraction exactly?

Contraction isn’t an official word in economics, at least not like “recession” is, but it does describe a shrinking of jobs or production. String enough contractions across different sectors together and you’ve got the R-word — recession. The official call is made by the National Bureau of Economic Research’s Business Cycle Dating Committee. It takes into account a “family” of indicators, including sales and industrial production, but the big one is jobs.

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