business cycle

The Great Recession Is Over! So Declares the NBER

The National Bureau of Economic Research has declared an end of the Great Recession.

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.

So, it's all good then and we're back to normal? Not exactly.

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.

Let's Chat Labor Productivity

One might notice the comment, Woe to the U.S. worker when productivity metrics are reported. Over and over again, I note that offshore outsourcing is the taboo word among mainstream economists, regardless of the numbers.

Well, it seems I am not alone in that assessment. A New York Times op-ed drives home the point:

There’s a problem: labor productivity figures, which are calculated by the Labor Department, count only worker hours in America, even though American-owned factories and labs have been steadily transplanted overseas, and foreign workers have contributed significantly to the final products counted in productivity measures.

Are we at the bottom of the recession now?

Back in August 2007 when I was first formulating my idea of a "Slow Motion Bust" that would recreate the Panics of the 19th and early 20th centuries, but in multi-year s l o w m o t i o n, I wrote on the Big Orange Political Blog that business cycle research seemed to be making a resurgeance. In that blog post, I discussed the compelling data set forth by UCLA economist Edward Leamer in a paper presented at Jackson Hole earlier in August 2007 (warning: pdf).

To summarize that blog entry, according to Prof. Leamer, the 10 recessions that have occurred since World War II have followed a typical pattern. Housing declines first, well before the recession; then durable goods especially cars (which fall most precipitously during the recession); then consumer nondurables (generally retail sales); and finally at the end, consumer services: