Monday, December 01, 2008

Cancel The Party, We're Now in Recession

From yesterday: We're very likely in a recession now, but since it hasn't yet been officially announced by the NBER, let me wish the current U.S. economic expansion a "Happy Seventh Birthday"!

According to the Business Cycle Dating Committee of the National Bureau of Economic Research, "a trough in business activity occurred in the U.S. economy in November 2001. The trough marks the end of the recession that began in March 2001 and the beginning of an expansion." So the current economic expansion actually started in November 2001, and therefore the 7th year of the expansion started a month ago, and until the official decision is announced we're in the 86th month of an economic expansion.

Update: The last economic expansion lasted only 73 months.

The NBER's historical business cycle data show that the average economic expansion since WWII lasted 57 months (4 years, 9 months). In that case, the current expansion is more than two years longer than the average expansion, depending on when the NBER decides the next recession starts.

UPDATE: Cancel the economic expansion's birthday party, and get ready to "celebrate" the first anniversary of the economic recession of 2008-2009. The NBER just announced that the economic expansion ended in December 2007, and we've been in recession since January 2008.


At 11/30/2008 7:39 PM, Blogger wcw said...

Now we're talking.

My guess: the economy entered recession by May 2008, probably a little before, possibly as early as February. It likely will last through January 2009, assuming decent policy responses and no unforeseeable calamity. The NBER will officially announce it around the end of the year, and no later than January 2008.

Who's next?

At 11/30/2008 7:40 PM, Blogger wcw said...

..urk, typed too fast. Make that through January, 2010.

At 11/30/2008 10:08 PM, Anonymous Anonymous said...

Ok, let the predictions begin. My guess is we entered the recession in January 2008. It will last till January 2010. It will be the longest and deepest recession since the Great Depression and the recovery will be weak and pathetic unless correct policy measures are taken.

At 12/01/2008 12:19 PM, Blogger John B. Chilton said...

Just announced: Recession started December 2007.

At 12/01/2008 12:47 PM, Blogger wcw said...

Machiavelli wins! The NBER determined that the *peak* was December 2007, meaning the recession started in January 2008. I was way off, though to my credit, I did throw in a lawyerly weasel "possibly as early as February." Still, way wrong and too timid. Mea culpa.

Our host was wronger (September? Please), of course. I put that down to overconsumption of the WSJ editorial pages and of Michael Fumento. You have my sympathies, kind sir. You have my sympathies.

At 12/01/2008 1:21 PM, Blogger stilettoheels said...

A blast from the past. Dust off those mea culpa dancing shoes, blog host.

At 12/01/2008 4:32 PM, Blogger Unknown said...

Meaningless technicalities to those of us who live in the City of Flint--home of broken windows, and broken dreams. I'm guessing that the writer of this blog lives in Grand Blecch. Just a guess.

At 12/01/2008 6:05 PM, Blogger Michael Smith said...

Obama has promised:
- To raise the top income tax rate
- To raise the corporate tax rate
- To raise the dividend tax rate
- To raise the capital gains tax rate
- To create a new tax on businesses that outsource jobs overseas
- To seize a portion of the oil industry's profits to fund an "energy rebate"
- To seize a portion of the pharmaceutical company's profits to lower drug prices
- To "spread the wealth around"
- To eliminate the secret ballot and allow union organizers to bring intimidation and threats to bear directly on anyone who dares to oppose a union.
- To raise the minimum wage by 50%
- To impose "cap and trade" limits on CO2 emissions that will, in his words, "cause electricity rates to soar" and "bankrupt anyone who builds a coal-fired power plant".
- To force all businesses to pay 100% of their employee's healthcare costs
- To complete the nationalization of the healthcare industry
- To impose protectionist trade restrictions by "renegotiating" existing free trade agreements.
- To commit America to funding U.N. anti-poverty programs, so that American taxpayers are not only bled to fund our home-grown deadbeats, but the who world’s as well.
- To raise a “civilian defense force” which, in his words is "just as strong and well-funded as our military" -- which makes it a $500 billion a year expenditure.

If Obama does any significant portion of that, we face much worse than a recession.

At 12/01/2008 7:31 PM, Blogger QT said...


Quite a list. We may be very glad that the present economic situation will constrain the new president's more whacky ideas.

At 12/01/2008 8:02 PM, Blogger Richard said...

Contain or expand, QT?

At 12/01/2008 9:55 PM, Blogger PeakTrader said...

And yet, as of today, the U.S. hasn't had two consecutive quarters of contracting real GDP. Using other criteria, it was a very close call.

"The committee believes that the two most reliable comprehensive estimates of aggregate domestic production are normally the quarterly estimate of real Gross Domestic Product and the quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic Analysis. In concept, the two should be the same, because sales of products generate income for producers and workers equal to the value of the sales. However, because the measurement on the product and income sides proceeds somewhat independently, the two actual measures differ by a statistical discrepancy.

The product-side estimates fell slightly in 2007Q4, rose slightly in 2008Q1, rose again in 2008Q2, and fell slightly in 2008Q3.

The income-side estimates reached their peak in 2007Q3, fell slightly in 2007Q4 and 2008Q1, rose slightly in 2008Q2 to a level below its peak in 2007Q3, and fell again in 2008Q3."

At 12/01/2008 11:37 PM, Blogger QT said...

How true, Richard. One only hopes that there is an upside limit on how much money these idiots can blow. Given the budgetary deficits over the last several years, that really is the audacious of hope.

There is a chance. Everyone has told us that Obama is a very clever individual. In order to win the democratic nomination, Obama had to go to the extreme left but he tacked back to the centre in order to win the election.

The one thing that gives me hope is his unquenchable ambition. This is not a man who wishes to be a one term fluke but someone who aspires after 2 terms. He cannot please every one and his recent appointments seem to suggest that he may well adopt a centrist agenda to maximize his chances of re-election.

When you ask a prospective employee what their strengths are very often a person will describe his weaknesses as his strengths. Obama has used the words "audacity of hope" to describe his candidacy but surely, this is the least audacious, play it safe, message parsing candidate to come down the pike in years.

We will have to wait and see. Obama has put himself on both sides of a number of issues. At this point, there is no clear idea of exactly what he will do.

At 12/02/2008 7:36 AM, Blogger said...

The recession just started this year?

What's Michigan's excuse for 2002-2007?

I thought it was all President Bush's fault.


At 12/02/2008 8:12 AM, Blogger Tom said...

Economists and their useless backword looking numbers finally telling me the obvious.

I don't need a weatherman to know which way the wind blows.

At 12/02/2008 8:43 AM, Blogger juandos said...

"Meaningless technicalities to those of us who live in the City of Flint--home of broken windows, and broken dreams. I'm guessing that the writer of this blog lives in Grand Blecch"...


Maybe you should've acquired a trade...


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