Tuesday, May 05, 2009

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.


At 5/05/2009 11:32 PM, Blogger Ironman said...

The earliest, perhaps most reliable confirmation that the current recession will have ended will likely be provided as early as 3 months after the fact, using the method developed by James Hamilton and Marcelle Chauvet. Here's the latest for what Hamilton expects....

At 5/06/2009 6:56 AM, Anonymous Anonymous said...

Not by a longshot.... After a couple trillion in bad debt is defaulted and some asset prices reverting to mean... perhaps.

At 5/06/2009 7:18 AM, Anonymous Anonymous said...

The idea that the economy has hit bottom is extremely far fetched. It's true that we might see positive GDP in Q3 or Q4 because companies will start up again to replenish inventories. But credit is still tight, households are still over-levered, foreclosures will continue, unemployment continues to rise extremely fast, and asset values are still low which should motivate people to save instead of spend. Don't forget that we saw strong positive GDP in Q2 of 2008 as well, which was in the middle of this recession. Like I said above we should get one or two quarters of positive GDP but likely fall to new lows in the first half of 2010, and that will be the bottom.

At 5/06/2009 8:04 AM, Blogger Robert Wenzel said...

LOL. Judging by their comments, I have to believe that anonymous @ 6:56 and @ 7:18 didn't read the entire post.

But they sure do have opinions.

At 5/06/2009 1:43 PM, Anonymous Anonymous said...

The recession couldn't be "over" in March of 92'. There was a Republican in the White House.

This time there's an "Obama" in the White House. I'm surprised the Times hasn't "called" it, already.

At 5/06/2009 6:02 PM, Blogger Hot Sam said...

Recovery? Yeah, right!

Even if GDP growth is positive this year, job recovery has been slower and slower for the past four recessions.

To say that CRE is weak is an understatement - bank concentrations of CRE/C&D loans is very high, default rates are rising, and vacancy rates in almost all cities and all property types are forecasted to rise through the end of 2010 - and that's the baseline forecast, not the worst-case scenario.

Semiconductor jobs are leaving and won't come back. The worldwide aircraft fleet is declining by 94 planes a month. If housing recovers, it will only be the result of another government-induced, debt-financed counter-bubble which will also burst.

We have yet to pay the price for our massive increase in money supply. Stagflation, here we come!

When durable goods production (not funded by government deficits) increase, then I'll believe we're recovering.

At 5/06/2009 6:02 PM, Blogger Dave Narby said...


I love you. I really do. Some of your posts focusing on market solutions, government ineptitude, and our high standard of living are absolute gold.

But we have systemic problems in our financial system. Everything the last administration did, and everything the current administration has done, is doing or is threatening to do is completely wrong.

I would urge you to read Mike Shedlock, Karl Denniger and ZeroHedge to get a feel for the magnitude of the issue.

In short: The geniuses out of the Ivy League schools freakin' broke the system... Hopefully beyond repair - Because it needs a complete teardown and rebuild from the ground up.

Best regards,


At 5/06/2009 8:01 PM, Blogger juandos said...

Thanks to ironman for that Econobrowser link I also wondered how this might affect the, 'recession might be over' bit?

What Does the Collapse of US Imports and Exports Signify?
The Collapse in Relation to GDP


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