economic cycles

The Great Recession Is Over! So Declares the NBER

The National Bureau of Economic Research has declared an end of the Great Recession.

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.

So, it's all good then and we're back to normal? Not exactly.

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.

Springtime during the Ice Age

On this Easter/Passover weekend while we are enjoying the blossoming of spring, Robert Reich has a blog post that nicely encapsulates a debate percolating through the econoblogosphere:

[W]e're not at the beginning of the end. I'm not even sure we're at the end of the beginning. All of these pieces of upbeat news are connected by one fact: the flood of money the Fed has been releasing into the economy.... The real question is whether this means an economic turnaround. The answer is it doesn't.

The only economic fundamental that's changed ... is that so many people got so badly burned that the trust necessary for consumers, investors, and businesses to repeat what they did then has vanished.

I spent the better part of an hour yesterday evening debating Larry Kudlow on his CNBC program, along with Arthur Laffer and two other financial analysts, all of whom were sure that the stock market had hit bottom and was now poised for a major recovery. I admire cockeyed optimism, and I understand why Wall Street and its spokespeople want to see a return of the bull market. Hell, everyone with a stock portfolio wants to see it grow again. But wishing for something is different from getting it.

In other words, the "green shoots" side and "dead of winter" side are polar opposites, and never the twain shall meet.

Not so. As it happens, there's good reason to believe that both sides are right.