Thursday, February 10, 2011

Yes, we are officially technically in a recovery

The National Bureau of Economic Research is the generally-recognized referee for setting the starting and ending dates of recessions. Their September 20, 2010 statement explains their scoring of the most recent recession, which they judge began in December 2007 and ended in June 2009, which is the "trough month" in their terminology:

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.

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.

The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date.
The Great Depression contained two distinct recessions, as illustrated in this chart of Paul Krugman's from his blog post Glenn Beck and the Fed, 1935 02/02/2011.

The Great Depression is conventionally dated from 1929 to 1939 or so. Wartime production, which began well before the attack on Pearl Harbor, finally brought employment back to non-depression levels. But there were two official recessions within that longer period.

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