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THE PROGRESSIVE REVIEW - September 23, 2010
Great Recession Ended in June 2009, but Who Knew?
by: Kevin G. Hall
McClatchy Newspapers - Report
Washington - With little fanfare, the National Bureau of
Economic Research declared Monday that the so-called Great
Recession is over, determining that the U.S. economy hit
bottom in June 2009 and began a long, sluggish rebound.
"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," the bureau said
in a statement Monday. "Rather, the committee determined
only that the recession ended and a recovery began in that
month."
The bureau officially dates recessions, and concluded that
this one was the longest on record, save for the Great
Depression. The so-called Great Recession lasted 18 months,
two months longer than the recessions of 1973-75 and
1981-82.
For many Americans, it still feels like recession. The
unemployment rate has been stuck around 9.6 percent for
months, almost 15 million Americans are without work and
dozens more are working two jobs or are in jobs that pay
less than their previous ones.
"I think this (statement) will forever cement economists
as being out of touch. This is cold comfort for someone
who is still unemployed, and it's more a matter of getting
the accounting right for economic history," said economist
Douglas Holtz-Eakin, a former director of the Congressional
Budget Office and the president of the American Action
Forum, a center-right policy research group.
The fact that the bureau needed almost 15 months since the
recession's official end to declare that it was over speaks
to the economic challenge the United States faces. The
bureau's Business Cycle Dating Committee waited to make a
final decision until key government data revisions had
occurred to gauge what had been the gross domestic product
? the broadest measure of the production of goods and
services ? and gross domestic income.
The committee noted that while growth and income were up
from last year's lows they were well below the peaks of
2007.
Recessions often are described as two consecutive quarters
of economic contraction, but they're more a period of fall-
ing economic activity across the economy and lasting more
than a few months. The bureau's researchers evaluate data
on income, employment and industrial production, as well
as sales.
In what could provide some cover to the Obama administr-
ation, struggling with the perception that it hasn't done
enough to boost employment, the committee members noted
that the bottom in hiring usually comes many months after
a bottom in contraction.
After the 2001-03 recession, employment bottomed 21 months
later, and employment hit its low six months after the end
of the latest recession, the bureau said.
The bureau, headquartered in Cambridge, Mass., also said
that economic activity could remain below normal for some
time after a recession.
That leaves the economy vulnerable to shocks. Few econom-
ists now predict a dip back into recession, but the slow
growth leaves room for contraction if European debt
problems further stall a global rebound. A disruption to
oil supplies that sharply increases energy prices also
could be a tipping point.
A shock to the financial system, not the usual business
cycle of ups and downs, caused the Great Recession. This
shock came partly from households and banks that took on
too much debt and had insufficient cash to adjust when
rising mortgage delinquencies and foreclosures began to
hit banks hard and a housing crisis took root. Households
and the private sector continue to pay down debt, a pain-
ful process called de-leveraging.
"By any measurement, we still have a very leveraged house-
hold sector," said Carmen Reinhart, a University of Mary-
land economist and co-author of "This Time Is Different,"
a history of financial crises over 800 years. "A lot of
these things, it's not that policy can provide a quick
fix... they do take time."
In a Sept. 13 paper titled "Diminished Expectations,
Double Dips and External Shocks: The Decade After the
Fall," Reinhart examined financial shocks such as the
1929 stock-market crash, the 1973 oil crisis and 15
severe post-World War II financial crises around the
world. Her conclusion: For a decade after these
disruptions, economic growth and income remained subpar,
and in most cases unemployment stayed higher than before
the crisis for well more than a decade.
Some economists argue that perhaps it's different for
the United States compared with other nations because it
remains the world's richest nation and the main engine of
the global economy. Reinhart doesn't think so.
"It's not like they didn't have a surge in credit, or a
current account deficit, or a boom in real estate. Does
any of that sound familiar? The symptoms are the symptoms,"
she said, noting that historical data from across the
globe suggest a U.S. recovery that takes many years.
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