The Recession is Over! or Maybe Not
The NBER, the National Bureau for Economic Research, which is the official caller of these things, announced that the current recession ended in June 2009. I have something of a love-hate relationship with the NBER. It is only retrospective in its calls. So I found it frustrating that in the late summer of 2007 I was predicting imminent recession and it took the NBER to the end of 2008 to make the same call, putting the start of recession in December 2007.
Now I think the NBER has called the end of recession too soon. Indeed I don't think the recession ever ended. What we have seen is ongoing deterioration in fundamentals, like employment and real estate, both private and commercial. Stimulus spending temporarily slowed the rate of decline and that with inventory rebuilding may even have brought the economy to a zero point, but not a reversal. What tipped the scales for the NBER, I think, is that superimposed on this, we have had stock and commodities market bubbles beginning in March 2009 and fueled by the Fed's ZIRP and other programs. My problem is that the NBER does not distinguish between a real reversal and a smoke and mirrors one.
In making its December 2007 call, a prime consideration for the NBER was the drop in employment against a backdrop of very poor job creation throughout the Bush years. Now the NBER is effectively ignoring employment in its call, citing it as a lagging indicator. There are two problems with this. A few weeks ago, I calculated the rate of un- and under- employment as of the end of August 2010 at 19.5% or 31.1 million. This is a huge number and there is simply nothing on the horizon that indicates, lagging or not, it will improve. And there are signals, such as the end of the stimulus and the large shortfalls in state and local budgets, that it could get significantly worse.
Perhaps the NBER could refine its conclusions. For the upper 10%, the recession ended in June 2009. For everyone else, it never did and looks like it will get considerably worse.