The Recession is Over?

According to the NBER, the recession is over. Not only that, it ended in June, 2009:

The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.

The very next paragraph is also important (underlining mine):

In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.

That first sentence confuses me. A “trough” marks the end of the declining phase but the committee did not conclude that conditions have improved? I guess what they are saying is that things haven’t really gotten better but they also haven’t gotten worse.

To me, it feels like we are still in a recession. Sure, we may not be “officially” in a recession but things definitely have not felt “better.” I realize “feelings” aren’t the same as facts. The S&P 500 Index is up nearly 28% (July 2009 – intraday, September 27, 2010) but unemployment is still over 9.6% (much higher if you include those who have given up looking for work) and GDP, although growing, only grew at an annual rate of 1.6% during the second quarter. To top all that off, the government is still fretting about the economy. So, although we may not be in a recession, try telling that to an unemployed person.

3 thoughts on “The Recession is Over?”

  1. “Recession” has become a much too common term to the general public. If things are not as good as they were, then surely we must be in a recession. In reality, text-book recessions are usually very short-term in nature and reserved only for the darkest of times.

    After seeing improved data across the board for the past 18 months, it’s no surprise that June 2009 was determined the ending date. We already knew it was over. We just didn’t have an official ending point.

    Really the only major data point that hasn’t seen marked improvement is the unemployment rate, but that’s just fine. It’s a lagging indicator for a reason, and the economy needs consistent GDP growth around 3% to really turn it around.

    Overall, it looks like the stock market wins again as one of the best leading indicators. Started rising back in March 2009 when things still looked awful and is now up 70%+.

  2. A trough can only be detected in hindsight, which is why they can’t ring the bell at the bottom.

    The only definition of the end of recession is that growth starts (or at least decline stops). It doesn’t mean growth is quick, the stock market moves up, employment picks up significantly, or that we all feel good now. It just means the GDP gets bigger. Some consequences MAY include stock market moves, unemployment declines, etc.

  3. I’ll side with my buddy Warren (Buffett) on this issue. According to his philosophy, the “recession” won’t be over until we return to a pre-recession state. In other words, unemployment rates need to go down, production needs to go up, and consumers need to start spending money – to match what was done before we entered this recession. Just my thoughts…

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