Arbiters Wait on Declaring End to Recession

[alienlovechild 75]

For the record, this recession isn’t over yet.

A committee of economists, charged with determining the beginnings and ends of recessions, confirmed Monday that it cannot yet declare an end to the recession that began in December 2007.

“Although most indicators have turned up, the committee decided that the determination of the trough date on the basis of current data would be premature,” the group at the National Bureau of Economic Research said in a statement. Such an acknowledgment is rare in the history of setting dates to business cycles and could affect the behavior of investors and consumers.

Despite a recent uptick in employment and income, the decision of the committee at a meeting last week — details of which were finalized over the weekend — reflects a lingering worry that the economy could turn downward again in a so-called double-dip recession.

Several economists on the committee, which has seven active members, said they considered such a turn to be unlikely. But, they said, the duration and severity of the contraction have made it hard to determine with authority that a recovery has begun.

“Many indicators are quite preliminary at this time and will be revised in coming months,” the committee statement said. A number of private economists have said they believed the recession ended in June or July last year.

The gross domestic product, the broadest measure of economic activity, officially began rising in the second half of 2009, suggesting that a recovery might have quietly started. But the committee takes other factors into consideration, like employment trends and consumer confidence.

The two previous recessions, in 1990-91 and in 2001, each lasted eight months and were mild enough that the committee felt confident in pronouncing them over in a year or less. As it was, the current recession was 11 months old before the committee announced its start date.

Now, the committee says that the timing of an upward turn has been harder to discern than in the past. Moreover, the government has revised several statistics after they were initially released, making it more difficult to say when the economy hit bottom.

“Hypothetically, if there were a new sharp downturn that came along tomorrow, would it count as a new recession or part of the same recession?” asked Jeffrey A. Frankel, a member of the panel, officially known as the Business Cycle Dating Committee. “In the latter case, we would have made a mistake by calling the trough last year and saying the recession was over.”

There is no formula for defining a recession, even though it is often casually described as two consecutive quarters of economic contraction. The committee relies on interpretation to determine the beginning or end of one.

The last time it made such a cautious statement was in December 1990, when it said that a recession had most likely begun between June and September but that it could not make a determination until the contraction was sufficiently long and deep; the committee announced four months later that the recession had started in July 1990.

It seems nearly certain that the present recession will end up lasting longer than the 16-month recessions of 1973-75 and 1981-82. They had been the longest downturns since the 43-month period from 1929 to 1933 that was the first phase of the Great Depression.

The committee, created in 1978, has assigned the start and end dates of economic contractions for every business cycle since 1854. It has long emphasized that it looks only backward, and does not make forecasts or predictions.

http://www.nytimes.com/2010/04/13/business/economy/13recession.html