NBER Announces US Recession Ended In June 2009, No Announcement Yet On When Depression Is Due To End

Tyler Durden's picture

The NBER has finally announced the most worthless and overdue piece of data, namely that somehow, miraculously, the US recession that started in December of 2007 ended in June of 2009. We have yet to hear when the distinguished Ph.D.-bearing shamans of Keynesianism at the NBER will convene to decide when the Depression that started in December of 2007 will end. Our estimate is sometime in the mid 2020s, long after the Dow hit 36,000 as news of total nuclear annihilation was priced in by WOPR. From the NBER: "The Business Cycle Dating Committee of the National Bureau of Economic
Research met yesterday by conference call. At its meeting, 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.
" Somehow we think the 17% of America's labor pool that is not fully employed will beg to differ with this assessment. But at least bankers will be able to justify their 2010 record bonuses.

Full NBER press release:

CAMBRIDGE September 20, 2010. The Business Cycle Dating Committee of the
National Bureau of Economic Research met yesterday by conference call.
At its meeting, 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.

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.

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.

The committee waited to make its decision until revisions in the
National Income and Product Accounts, released on July 30 and August 27,
2010, clarified the 2009 time path of the two broadest measures of
economic activity, real Gross Domestic Product (real GDP) and real Gross
Domestic Income (real GDI). The committee noted that in the most recent
data, for the second quarter of 2010, the average of real GDP and real
GDI was 3.1 percent above its low in the second quarter of 2009 but
remained 1.3 percent below the previous peak which was reached in the
fourth quarter of 2007.

Identifying the date of the trough involved weighing the behavior of
various indicators of economic activity. The estimates of real GDP and
GDI issued by the Bureau of Economic Analysis of the U.S. Department of
Commerce are only available quarterly. Further, macroeconomic indicators
are subject to substantial revisions and measurement error. For these
reasons, the committee refers to a variety of monthly indicators to
choose the months of peaks and troughs. It places particular emphasis on
measures that refer to the total economy rather than to particular
sectors. These include a measure of monthly GDP that has been developed
by the private forecasting firm Macroeconomic Advisers, measures of
monthly GDP and GDI that have been developed by two members of the
committee in independent research (James Stock and Mark Watson,
available here), real personal income excluding transfers, the payroll
and household measures of total employment, and aggregate hours of work
in the total economy. The committee places less emphasis on monthly data
series for industrial production and manufacturing-trade sales, because
these refer to particular sectors of the economy. Movements in these
series can provide useful additional information when the broader
measures are ambiguous about the date of the monthly peak or trough.
There is no fixed rule about what weights the committee assigns to the
various indicators, or about what other measures contribute information
to the process.

The committee concluded that the behavior of the quarterly series
for real GDP and GDI indicates that the trough occurred in mid-2009.
Real GDP reached its low point in the second quarter of 2009, while the
value of real GDI was essentially identical in the second and third
quarters of 2009. The average of real GDP and real GDI reached its low
point in the second quarter of 2009. The committee concluded that strong
growth in both real GDP and real GDI in the fourth quarter of 2009
ruled out the possibility that the trough occurred later than the third
quarter.

The committee designated June as the month of the trough based on
several monthly indicators. The trough dates for these indicators are:

Macroeconomic Advisers monthly GDP (June)
The Stock-Watson index of monthly GDP (June)
Their index of monthly GDI (July)
An average of their two indexes of monthly GDP and GDI (June)
Real manufacturing and trade sales (June)
Index of Industrial Production (June)
Real personal income less transfers (October)
Aggregate hours of work in the total economy (October)
Payroll survey employment (December)
Household survey employment (December)

The committee concluded that the choice of June 2009 as the trough
month for economic activity was consistent with the later trough months
in the labor-market indicators - aggregate hours and employment -for two
reasons. First, the strong growth of quarterly real GDP and real GDI in
the fourth quarter was inconsistent with designating any month in the
fourth quarter as the trough month. The committee believes that these
quarterly measures of the real volume of output across the entire
economy are the most reliable measures of economic activity. Second, in
previous business cycles, aggregate hours and employment have frequently
reached their troughs later than the NBER's trough date. In
particular, in 2001-03, the trough in payroll employment occurred 21
months after the NBER trough date. In 2009, the NBER trough date is 6
months before the trough in payroll employment. In both the 2001-03 and
2009 cycles, household employment also reached its trough later than
the NBER trough date.

The committee noted the contrast between the June trough date for
the majority of the monthly indicators and the October trough date for
real personal income less transfers. There were two reasons for
selecting the earlier date. The first was described above -- the fact
that quarterly real GDP and GDI rose strongly in the fourth quarter. The
second was that real GDI is a more comprehensive measure of income than
real personal income less transfers, as it includes additional sources
of income such as undistributed corporate profits. The committee's use
of income-side measures, notably real GDI, is based on the accounting
principle that the value of output equals the sum of the incomes that
arise from producing the output. Apart from a random statistical
discrepancy, real GDI satisfies that equality while real personal income
does not.

The committee also maintains a quarterly chronology of business
cycle peak and trough dates. The committee determined that the trough
occurred in the second quarter of 2009, when the average of quarterly
real GDP and GDI reached its low point.

For more information, see the FAQs
and the more detailed description of the NBER's business cycle dating
procedure at http://www.nber.org/cycles/recessions.html. An Excel spreadsheet
containing the data and the figures for the indicators of economic
activity considered by the committee is available at that page as well.

The current members of the Business Cycle Dating Committee are:
Robert Hall, Stanford University (chair); Martin Feldstein, Harvard
University; Jeffrey Frankel, Harvard University; Robert Gordon,
Northwestern University; James Poterba, MIT and NBER President; James
Stock, Harvard University; and Mark Watson, Princeton University. David
Romer, University of California, Berkeley, is on leave from the
committee and did not participate in its deliberations.