Is the Recession Over?

NY TIMES -- Is the recession over? Finally, the answer appears to be yes. But before anyone gets too excited, a dose of reality. The difference between recession and recovery may be little more than a statistical technicality. The economy may not be falling, but neither is it rising very quickly.

The outlook is for more of the same: slow, perhaps even glacial, improvement. Unemployment may continue to rise for three to six months, perhaps longer. And there is always the possibility that the recovery will abort.

Still, moving up beats moving down. There is light, if only dim, at the end of the economic tunnel. The U.S. economy has been wallowing in recession for more than a year and a half and stagnating for about three years. Output hasn't fallen very much -- the drop has been only half the size of recent recessions. It has sent millions of Americans onto the jobless rolls.

Not everything is rosy. Robert Gordon, an economics professor at Northwestern University and a member of the committee that determines the stop and start dates of recessions for the National Bureau of Economic Research, says one-third of the economy will continue to stagnate. Commercial real estate is dead; until vacant office space is filled, there won't be new construction. And the defense industry is headed down, fast. Even exports -- which have been the main source of new jobs during the last few years -- will probably slow because the Japanese and German economies are running into trouble.

The best guess is that unemployment will stay steady or edge a bit higher because companies are unlikely to make permanent hires until they're convinced recovery is for real. When might that be? Perhaps early fall.

MP: This was published in the New York Times on Sunday, March 22, 1992, which was actually one full year after the recession actually ended, but a full nine months before the NBER made its official announcement on December 22, 1992 that the 1990-1991 recession ended in March 1991.

Bottom Line: It takes almost two years after a recession ends before the NBER makes its final determination of a "trough" (21 months after the 1990-1991 recession, and 20 months after the March-November 2001 recession), and even a year after a recession ends, many in the media (see NY Times above: "There is always the possibility that the recovery will abort.") are not yet convinced of an economic recovery, and are still spreading suspicion, uncertainty and reservations about the expansion.