Recession over? Economists panel isn't sure yet

McClatchy NewspapersApril 12, 2010 

WASHINGTON — Most mainstream economists think the nation's deep recession is over, but a special body that makes such a determination took a pass Monday, saying what many Americans intuitively feel, that the data remain inconclusive.

The National Bureau of Economic Research, a nonprofit group of economists, determines when recessions start and end as part of its work in calculating the peaks and troughs of the business cycle.

The bureau's Business Cycle Dating Committee met last Friday and concluded that the jury is still out on the recession's end, announcing that decision on its Web site Monday.

The committee reaffirmed that the recession began in December 2007, but its seven members couldn't determine whether the recession has ended.

"The trough date would identify the end of contraction and the beginning of expansion. 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 committee said in a statement. “Many indicators are quite preliminary at this time and will be revised in coming months.”

One reason for a cautious view is the stubbornly high jobless rate.

Unemployment remains anchored in the ballpark of 9.7 percent. March employment numbers finally showed a solid gain of around 162,000 jobs, partly aided through government hiring to conduct the 2010 census.

Although economic expansion usually is marked by two consecutive quarters of growth, the committee wants to see more evidence of strong and consistent job growth as an indicator that businesses are hiring on the basis of a firming economy.

“We will be ready to assign a particular month to the date of the trough when data revisions have settled down and the expansion has continued to the point where a sudden reversal would constitute a new recession and not a continuation of the one that started in December 2007,” Robert Hall, a Stanford University economist and the chairman of the bureau's committee, told McClatchy. “If current forecasts hold, that time will come in a matter of months.”

Hall was optimistic, however, that the economy is on the mend.

“In my personal view — not in my capacity as chair of the committee — I'd say that despite the fact that the contraction was the deepest by all measures since the Great Depression, the pattern of the recovery, to date, is not terribly different from earlier recessions,” he said.

What's different this time, however, is the record numbers of long-term unemployed. Some 15 million Americans are unemployed, 6.5 million of them for half a year or longer. A full 16.9 percent of the work force is either jobless, working part time because full-time work isn’t available or wants to work but hasn’t looked in the past month because of bleak conditions.

It’s why a sluggish recovery still leaves fear about a possible dip back into recession late this year.

“The question is, are businesses going to feel confident enough ... that they think the recovery is firmly in place and therefore they’re going to want to hire? And will they have access to credit to do so?” asked Gus Faucher, the director of macroeconomics for Moody’s Economy.com, a forecaster in West Chester, Pa.

The Obama administration, stung by an overly optimistic unemployment forecast last year, maintained a cautious view.

“We will leave it to outside economists to determine whether the recession is over in technical terms, but for the millions of Americans still struggling, the president will continue to push for policies that lay the groundwork for businesses to grow and for American families to get back on their feet,” said Amy Brundage, a White House spokeswoman.

The president of the National Bureau of Economic Research, James Poterba, cautioned in an interview that the committee’s work only marks turning points and doesn’t capture what ordinary Americans are feeling.

“Recovery and recession are about directions up or down. You can be moving up from a low base and moving down from a high plateau,” he said.

A decision on putting a firm date on the recession’s end is expected in coming months as more reliable economic data come in, Poterba said.

ON THE WEBNational Bureau of Economic Research statement

National Bureau of Economic Research explanation of process

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