NBER: Recession officially ended in June 2009
The National Bureau of Economic Research is officially calling a trough to the recent economic downturn. As predicted, the recession ended in June 2009. 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. As of the last meeting in April 2010, the NBER found that although most economic indicators turned up, 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 NBER concluded. Kenneth Beauchemin, a senior research economist from the Cleveland Federal Reserve, predicted such a result around two weeks ago. In his research, though, he found that the recovery would pass somewhat unnoticed due to weakness. "I have looked at the recovery from 30,000 feet," he said. "From that height, with some inevitable slippage and nuance, the recovery looks consistent with past recoveries—at least so far. Closer to the ground, recoveries will all look very different, with harder-hit sectors taking longer to recover or becoming permanently smaller. Credit will be tighter for longer in some sectors than in others." The NBER called bottom in June 2009 for two main reasons, as it measures its economic data quarterly. First, the strong growth of quarterly real GDP and real GDI in the fourth quarter was inconsistent with designating any month in the fourth quarter 2009 as the trough month. Second, in previous business cycles, aggregate hours and employment have frequently reached their troughs later than the NBER’s trough date. According to the NBER, in 2001-03, the trough in payroll employment occurred 21 months after the trough date. In 2009, the NBER trough date is 6 months before the trough in payroll employment. In both the 2001-03 and 2009 cycles, household employment also reached its trough later than the NBER trough date. Write to Jacob Gaffney.