Dating The End of The Great Recession
We will probably know by the end of this year if the Great Recession ended sometime in the middle of last year, or if it will go down in the books as actually running from Dec. 2007 through at least the end of 2010 (and making it officially by far the longest recession since the early 1930s).
With the benchmark revisions to GDP just released, it is clear that the economy will have to grow at least 4.3% at an annualized rate over the current quarter (Q3) for GDP to finally have made it back up to its pre-recession level. This is unlikely.
A more possible scenario would be for GDP over the entire second half of this year to grow enough to recover to its pre-recession level. But this, too, is far from a guarantee, given that many leading indicators are actually suggesting that GDP may even start contracting again this year and/or next.
Given that the employment picture has barely started to recover, a relapse of GDP before GDP had made it back up to pre-recession levels, which would almost certainly result in further job losses as well, would arguably tilt the decision by the recession dating committee of the National Bureau of Economic Research to extend the official duration of the Great Recession through this year's end, at the very least.
Generally, even when it is fairly clear that a recession has ended, the NBER tends to wait quite a while before announcing it. This is not because they are not sure that a given recession is over, so much as they like to be certain about the precise month of its ending when making it formal. The last four such announcements were as follows:
NBER COMMITTEE CONFERS: NO TROUGH ANNOUNCED
CAMBRIDGE, April 12 -- The Business Cycle Dating Committee of the National Bureau of Economic Research met at the organization’s headquarters in Cambridge, Massachusetts, on April 8, 2010. The committee reviewed the most recent data for all indicators relevant to the determination of a possible date of the trough in economic activity marking the end of the recession that began in December 2007. The trough date would identify the end of contraction and the beginning of expansion. Although most indicators have turned up, the committee decided that the determination of the trough date on the basis of current data would be premature. Many indicators are quite preliminary at this time and will be revised in coming months. The committee acts only on the basis of actual indicators and does not rely on forecasts in making its determination of the dates of peaks and troughs in economic activity. The committee did review data relating to the date of the peak, previously determined to have occurred in December 2007, marking the onset of the recent recession. The committee reaffirmed that peak date.
For more, see Calculated Risk:
Click on graph for larger image in new window.
The recession was clearly worse than originally estimated (we suspected this already using Gross Domestic Income).
In fact real GDP in Q2 2010 was lower than originally reported for Q1 2010. And annualized real GDP is still 1.1% below the pre-recession peak. This means that real GDP would have to grow at a 4.3% rate over the next quarter to reach the recession peak.
With the benchmark revisions to GDP just released, it is clear that the economy will have to grow at least 4.3% at an annualized rate over the current quarter (Q3) for GDP to finally have made it back up to its pre-recession level. This is unlikely.
A more possible scenario would be for GDP over the entire second half of this year to grow enough to recover to its pre-recession level. But this, too, is far from a guarantee, given that many leading indicators are actually suggesting that GDP may even start contracting again this year and/or next.
Given that the employment picture has barely started to recover, a relapse of GDP before GDP had made it back up to pre-recession levels, which would almost certainly result in further job losses as well, would arguably tilt the decision by the recession dating committee of the National Bureau of Economic Research to extend the official duration of the Great Recession through this year's end, at the very least.
Generally, even when it is fairly clear that a recession has ended, the NBER tends to wait quite a while before announcing it. This is not because they are not sure that a given recession is over, so much as they like to be certain about the precise month of its ending when making it formal. The last four such announcements were as follows:
- The November 2001 trough was announced July 17, 2003
- The March 1991 trough was announced December 22, 1992
- The November 1982 trough was announced July 8, 1983
- The July 1980 trough was announced July 8, 1981
NBER COMMITTEE CONFERS: NO TROUGH ANNOUNCED
CAMBRIDGE, April 12 -- The Business Cycle Dating Committee of the National Bureau of Economic Research met at the organization’s headquarters in Cambridge, Massachusetts, on April 8, 2010. The committee reviewed the most recent data for all indicators relevant to the determination of a possible date of the trough in economic activity marking the end of the recession that began in December 2007. The trough date would identify the end of contraction and the beginning of expansion. Although most indicators have turned up, the committee decided that the determination of the trough date on the basis of current data would be premature. Many indicators are quite preliminary at this time and will be revised in coming months. The committee acts only on the basis of actual indicators and does not rely on forecasts in making its determination of the dates of peaks and troughs in economic activity. The committee did review data relating to the date of the peak, previously determined to have occurred in December 2007, marking the onset of the recent recession. The committee reaffirmed that peak date.
For more, see Calculated Risk:
Click on graph for larger image in new window.
The recession was clearly worse than originally estimated (we suspected this already using Gross Domestic Income).
In fact real GDP in Q2 2010 was lower than originally reported for Q1 2010. And annualized real GDP is still 1.1% below the pre-recession peak. This means that real GDP would have to grow at a 4.3% rate over the next quarter to reach the recession peak.