It's official: the US recession ended in June 2009

The Business Cycle Dating Committee of the National Bureau of Economic Research has determined that the recession which began in December 2007 ended in June 2009. (The NBER, which is viewed as the official arbiter of expansions and contractions and sees itself as establishing the historical record, takes its time over recession calls--for example, it declared on December 1, 2008 that a recession had begun a year earlier in December 2007). Thus, the most recent recession was 18 months in length, the longest recession in post-World War II history (the recessions of 1973-75 and 1981-82 were both 16 months). Also, the NBER stated "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."

Peak to trough, real GDP fell 4.1% during this recession, making the most recent recession the deepest in GDP terms in the post-war period. In the first year of recovery, however, real GDP has only risen 3.0%, which compares to an average first-year recovery of 5.8%. From its trough May 2007, the unemployment rate rose 5.7% points, the largest increase in the unemployment rate during any of the recessions since WWII (the average increase in the unemployment rate in prior recessions was 3.1% points).

Please see the Recession Scorecard scorecard below. This one-page monitor shows peak-to-trough changes in various economic and financial market indicators during recession, along with the change in these indicators in the year following the end of recession. The monitor is intended to allow for a comparison of the performance of various indicators during recession.

BOTTOM LINE

It is not suprising that the NBER selected June 2009 as the recession trough and there is no real significance in this pronouncement except that risk markets may have a short-term lift in confidence.

We do not expect a double-dip recession but the recession being declared over is a matter of historical record that we agree with and has little bearing on whether another downturn is or isn't in the offing (the shortest gap between recessions occurred between the 1980 credit-control recession that ended in July 1980 and the recession that began in July 1981). As far as any impact on mid-term campaigning, we suspect the declaration that the recession is over (which simply means economic activity is rising rather than falling) will ring hollow for the electorate, which is likely to be worried by the level of economic activity (particularly the unemployment rate).

Recession Scorecard

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