The NBER Business Cycle Dating Committee has determined that the recession which began in December 2007 ended in June 2009. In the report announcing this decision, the NBER wrote that economic activity is typically lower post-recession than it was pre-recession, meaning that the initial stages of a technical recovery will not seem like a recovery. There is much more. So I have highlighted the significant bits of their report.
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.
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 committee waited to make its decision until revisions in the National Income and Product Accounts, released on July 30 and August 27, 2010, clarified the 2009 time path of the two broadest measures of economic activity, real Gross Domestic Product (real GDP) and real Gross Domestic Income (real GDI). The committee noted that in the most recent data, for the second quarter of 2010, the average of real GDP and real GDI was 3.1 percent above its low in the second quarter of 2009 but remained 1.3 percent below the previous peak which was reached in the fourth quarter of 2007.
Many have maintained that the recession never ended. However, I have been saying since April 2009 that the recession end would be dated sometime in mid-to-late 2009. Inventories and the peak in jobless claims played a large role in making that determination. It was also clear that the more time elapsed since GDP turned up in Q3 2009, the larger the prospect that they would be forced to date the recession end in 2009 (see my comments here).
The NBER determination is slightly earlier than I had indicated (August 20009) for reasons they give above. But the question now is regarding the sustainability of the recovery we have had since then.