Recession’s over, economists say to a skeptical public
This just in: The recession ended more than a year ago — in June 2009.
That may seem perplexing, given the sour state of the economy, but the panel of experts designating when serious economic downturns begin and end typically takes a year or so to make the calls.
Even so, minutes after the experts announced Monday that the worst recession in more than half a century had officially ended 15 months ago, its members felt the sting of indignant reaction from a public for whom economic pain continues to be an everyday reality.
“Hallucinatory news,” one blogger snapped in response to the report by the National Bureau of Economic Research, a private nonprofit research group that is considered the official arbiter of economic contractions and expansions.
“I’ll start believing the recession is over when I stop seeing endless numbers of people sleeping on the streets,” said another.
And the public reaction was only the latest evidence that, with unemployment high, job creation low, the housing market on life support and other day-to-day economic realities still bad, most Americans see little difference between the recession and current conditions.
President Obama acknowledged the widespread dissatisfaction with the economy during a town-hall-style meeting broadcast on the business news channel CNBC. Alluding to the announcement that the recession had officially ended, he remarked on the public’s “understandable” frustration.
“The hole was so deep that a lot of people out there are still hurting, and probably some folks here in the audience are still having a tough time,” he said. “So the question then becomes, what can we now put in place to make sure that the trend lines continue in a positive direction, as opposed to going back in the negative direction?”
During the hourlong event, Obama pressed for extending tax relief for the middle class and insisted that he has “absolutely not” vilified or enacted policies harmful to the business community — criticisms that Republican leaders have made in blaming the administration for the nation’s tepid recovery and job growth.
The NBER committee made its determination after considering numerous economic data and concluding that several key measures of economic activity — including total output and industrial production — pointed to June 2009 as the trough of that business cycle.
The 18-month recession that started in December 2007 was the longest since the Great Depression in the 1930s.
Mark Zandi, chief economist at Moody’s Analytics, said it was noteworthy that the panel settled on June, as it was during that month that the spending from the Recovery Act stimulus was at its maximum.
“One conclusion is that the stimulus played an important role in bringing the recession to an end,” said Zandi, who has been an economic advisor to officials and lawmakers in both parties.
The NBER panel, in a lengthy statement that seemed to anticipate the public reaction to its decision, noted that employment was typically a lagging indicator and that unlike other broad measures of the economy, employment didn’t hit bottom until December 2009.
What’s more, the panel took pains to note that a determination of the end of the recession doesn’t mean the economy has returned to vigorous growth.
“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,” the statement said.
The committee said it made its determination based on the length and strength of the recovery to date. It said the nation’s gross domestic product, a broad measure of economic activity, reached its low point in the second quarter of 2009.
But with new and more recent indicators pointing to a slowdown, the panel, which usually dates beginnings and ends of recessions about 12 months after the fact, took a little longer this time before issuing a final say in the matter.
“It’s been such a weak recovery that they waited to make sure they could call it a trough,” said Diane Swonk, chief economist at Mesirow Financial in Chicago.
The NBER determination is important in that it marks an end to a recession that could have been much worse, she said, but it doesn’t mean a whole lot to Main Street. “You can’t escape the reality that it’s a subpar recovery.”
Indeed, for most ordinary Americans, what may matter most are jobs, the value of their homes and their incomes. And on those fronts, the recession hardly looks like it’s over for many people.
Housing sales and prices remain depressed, and the jobs added since the start of the year have been far below the levels needed to bring down the unemployment rate, currently at 9.6%. Income gains also have lagged.
The recession is two months longer than either of the two previous longest postwar recessions, in 1973-75 and 1981-82. From 1945 to 2001, there have been 10 recessions that on average lasted 10 months, according to the NBER.
Robert Hall, a Stanford economics professor and one of seven NBER panel members who deliberated on the matter, followed the immediate reaction on the Internet to his group’s announcement.
“At least half of them excoriate us for saying that the recession is over,” Hall said. “But we are only saying that things started to get better in June 2009, not that times are good.”
Michael A. Memoli in the Washington bureau contributed to this report.