Is the recession over?
Posted
Jul 15 2009, 12:11 PM
by
Kim Peterson
Rating:
Once again, economic observers are coming forward to declare that the recession is over.
But what about the still-increasing unemployment rate and the still-dour retail climate? Pfft, they say. Ignore those numbers and break out the party hats. So are these guys right? Let's examine the evidence.
GDP Growth. A St. Louis consulting firm that tracks gross domestic product says that its GDP index was tracking -0.1% for the second quarter, but has turned up to 2.4% for the third quarter. The nation's biggest banks also say they expect GDP to grow in the third quarter.
Permanent change. The Economic Cycles Research Institute says the recession is ending this summer, and may be already over, according to Slate. That's because it's seeing a sustained rise in leading indicators, and most of the indicators are heading in the same direction.
Fragile recovery. Merrill Lynch analysts said this week that "the recession is over" and that the economy has begun a "fragile recovery," according to the Los Angeles Times. The analysts think the Fed will keep the short-term interest rate close to zero until 2011. Investors sitting on their cash should start buying stocks, Merrill says. (Say, Merrill wouldn't have any ulterior motive here, would it?)
The normal recession lasts about 18 months, some economists say. If that held true this time around, the recession should have ended last month. But this is not a normal recession.
The problem is that unemployment is still ticking up, and without positive job numbers in sight, it's very tough to call the end of the recession. A recovery is not immediately evident, forcing experts to grab hold of anything they think might be the early sputtering of an engine coming back to life.
The folks who give the official word of the recession's end won't do so for a long time. The National Bureau of Economic Research didn't call the end of the 2001 recession until a year and a half after the fact, the Calculated Risk blog notes. The bureau took even longer to acknowledge the end of the 1990-1991 recession. But one economist on the bureau's business cycle committee took the unusual step recently of declaring the recession officially over.
We may be headed for a jobless recovery. Even Fed chairman Ben Bernanke seems resigned to the possibility. And for many Americans, that won't feel like a recovery at all.
Related reading:
Bond market: Recession to end in October
When the recession will really end
Recession to end in June?
Surprise! We're officially in a recession
