Great Recession: December 2007 to ?

Louis Johnston From economist Louis Johnston, St. John’s University | College of St. Benedict

Is the Great Recession over? Most economists would answer yes. But we don’t know yet exactly when.

On Monday, the group that makes the official call on recessions and expansions said that while things were looking up, it would be “premature” to date the end of this downturn.

There’s no doubt data are sending mixed signals.

Industrial production, Gross Domestic Product (the chief measure of U.S. output) and similar data tell us that the economy is starting to grow. Industrial production has increased every month since June 2009. GDP grew in the 3rd and 4th quarters of 2009.

On the other hand…

Household after-tax income has been flat, leading some analysts to worry that household consumption will slow down in the coming months. Employment data tell us that firms are boosting output through increased productivity of their current workers — not through new hiring.

Add to all of this the fact that recessions affect different areas of the country in different ways and at varying times and you can see why it’s hard to pick an end-of-recession date.

Minnesota, fortunately, looks to be past the trough, though the unemployment data released on Thursday indicate that employment is not yet growing.

Officially, a recession is a period in which the economy grows at a rate significantly below normal. It can last from a few months to more than a year. Nationally, the economy last peaked in December 2007.

Experts at the National Bureau of Economic Research want to make sure they get the recession’s end-date right. They do not want to go back and revise it if new data show their first choice was wrong.

What ultimately matters, though, is not the exact date the recession ended. What matters is whether households and businesses believe that their economic prospects are looking up, and they begin to consume, invest, and hire.

Johnston teaches economics at St. John’s University and the College of St. Benedict and is a regular voice on MPR News.

Bonus info: Here’s a chart showing annual changes in U.S. economic growth during recessions and expansions. (Click on the chart for a larger view.)

fredgraph3.png

Source: Federal Reserve Bank of St. Louis

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