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Economy in Brief

Longest Recession Since WWII Declared Over; Forecasters Expect Trend Growth From Here
by Tom Moeller   September 20, 2010

For roughly one year, Haver Analytics has used June 2009 in its charts as the end of the most recent recession. Today the National Bureau of Economic Research (NBER), the arbiter for dating recessions, declared June 2009 as the end to the recession which began in December of 2007. These eighteen months constitute the longest recession since WWII. Moreover, the peak-to-trough decline in real GDP during that period was by far a record at 4.1%.

The NBER uses a variety of economic indicators to date the beginning and ending of recessions. None, however, has been more accurate for dating purposes than the Index of Coincident Indicators from the Conference Board. The Coincident Indicators measure four aspects of the U.S. economy including real business sales, industrial production, nonfarm employment and real personal income. These figures are available in Haver's BCI database. Clearly, these series miss huge parts of the U.S. economy. But the others are either leading (housing), lagging (business spending), non-volatile (services & gov't), too-volatile (inventories) or indirect (foreign trade) to be appropriate for recession dating. Another series worthwhile for recession dating is aggregate hours worked (employment times hours) from the establishment employment report. This measure misses, however, worker productivity.

The nasty aspect of the recovery from the recent recession is that it's been muted and is expected to remain so. During the four quarters following this recession's end, real GDP growth averaged 3.0%. Two other recoveries saw growth that low, following the 1980 and 1990 recessions. But those recessions were short and/or mild. This recession has been neither. As for the next year, growth is widely forecasted to be 2.7%, or barely trend. The usual postwar pop in growth of 6.0% or so is being held back by a myriad of factors including weak retail spending (too much personal debt and too many aging baby-boomers), weak housing (past overbuilding), no boost from inventories (weak demand & no pricing incentive) and no kick from foreign trade (weak growth abroad).

The release from the National Bureau of Economic Research can be found here.

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