June 11 (Bloomberg) -- The recent volatility in financial and commodity markets is extreme only if one ignores the schizophrenic commentary and analysis that's driving it.

One day the U.S. is in recession; the next day the financial crisis is over. Then it's the scourge of $135 oil and '70s-style stagflation that's going to do us in, followed in quick succession by the end of the credit crisis (again) and a return to Goldilocks. Maybe a guided meditation is in order.

(Close your eyes. Take a deep breath. Let all the air out of your lungs. As you exhale, feel all the tension, all the stress of the day leaving your body. Relax all your muscles. Focus on the breath.)

In a 24-hour period late last week, the market mood went from upbeat (consumers are spending, the dollar is appreciating, the Federal Reserve will raise interest rates by year-end) to funereal (unemployment is up, higher oil prices will kill spending, the Fed can't tighten, recession is back) before you could say ``om.''

Instant information doesn't have to produce instant conclusions. Recession isn't an on-again, off-again phenomenon. In fact, it's more of a process than an event.

Here's what the National Bureau of Economic Research's Business Cycle Dating Committee, the official arbiter of the economy's peaks and troughs, looks at when determining an expansion has ended and a recession begun:

``A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale- retail trade.''

Key Word Search

Key words: The decline must be ``significant.'' A modest drop in employment won't cut it.

It must be prolonged. A few months of sagging industrial production doesn't qualify.

It must be widespread, with declines reflected in the four economic variables that correlate well with real gross domestic product.

(Feel the muscles of your back relax as you breathe slowly and gently.)

Looking at the graphs of these indicators, one observes that they move in long, broad, sweeping trends: mostly up, periodically down. Which way is the trend now?

Non-farm payrolls have fallen for five consecutive months; six for private payrolls. The declines aren't significant, averaging 65,000 per month overall and 69,000 in the private sector. But hey, the gains weren't all that spectacular on the way up.

Evaporating Net Worth

Household net worth fell in the fourth quarter of 2007 and first quarter of 2008, the first back-to-back declines since 2002. Almost 9 percent of mortgages were either delinquent or in foreclosure in the first quarter, a record. Given that kind of economic backdrop, does it seem likely consumers are going to run out and blow their $600 (per individual) or $1,200 (per couple) fiscal stimulus checks on tchotchkes?

Some households won't have that option. It turns out that states have seized $47.9 million of checks to satisfy back taxes, according to a June 5 story in the Atlanta Journal Constitution.

The May jobs report showed a jarring 0.5 percentage point jump in the unemployment rate to 5.5 percent.

(Continue to breathe slowly and naturally. Be aware of the relaxation starting down your legs and feet.)

Is it likely the economy deteriorated that much between the April and May labor market snapshots? No. Is May's rate overstated? Perhaps. Is April's understated? More likely.

Another Employment Indicator

Once again, which way is the trend in various employment indicators, including initial jobless claims, continuing claims, a survey of the difficulty of finding a job, and consumer confidence, which for most folks hinges on job prospects? (Answers: up, up, up, down.)

That message was reinforced by the Conference Board's new employment trends index that debuted Monday. The ETI, an aggregate of eight labor-market indicators, including jobless claims, job openings and the number of temporary and involuntary part-time workers, ``has accurately signaled every rise and fall in employment over the last 35 years,'' the Conference Board said in its press release.

The ETI peaked in July 2007 and has declined in every month since then except one, forecasting ``further softening in the labor market,'' according to the Conference Board, an independent business and research organization in New York.

(Allow yourself to drift deeper into this dreamlike state of calmness, comfort and control.)

No Imminent Date

I wrote back in February that all four NBER indicators peaked late last year. The Bureau of Economic Analysis subsequently unearthed additional income in the fourth quarter of last year and first quarter of this year. So real personal income less transfer payments now shows a peak in February. Revised industrial production set a high in January.

It's too early for the NBER dating committee to determine that a cycle peak has occurred. The declines in its four variables don't qualify as either significant or prolonged just yet.

It wasn't until Nov. 26, 2001 -- what turned out to be the trough month -- that the committee declared March 2001 as a business cycle peak. At the time the dating committee issued its advisory, real income was still rising, an impression upended by data revisions.

(With practice, these basic meditation techniques will help you to relax more deeply and completely. Take a deep breath before Friday's report on consumer prices, and experience a sense of calmness, comfort and relaxation -- before you scream ``sell!'')

(Caroline Baum, author of ``Just What I Said,'' is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net.

Last Updated: June 11, 2008 00:04 EDT