Despite NBER Statement, Recession Is Likely Over

Despite NBER Statement, Recession Is Likely Over

via WSJ.com: Real Time Economics on 4/12/10

This morning the National Bureau of Economic Research's Business Cycle Dating Committee released a statement, which said that it's premature to declare the recession that started in December 2007 is over, but that doesn't mean we're still in a recession.

First a little background: the committee is considered the official arbiter of when U.S. recessions begin and end. Currently, there are seven economists who serve on the nonpartisan, nonprofit group, which was formed in 1978, though the NBER has been dating recessions since 1929. The NBER doesn't define a recession in terms of two consecutive quarters of decline in real GDP, a definition that is often cited as a rule of thumb. Rather, a recession is a significant decline in 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.
Since the definition of recession takes so many factors into account, the committee often takes its time to determine the end date. It didn't officially declare until July 2003 that the 2001 recession, which ran from March to November of that year, was over.
The committee's dating procedure is basically an academic exercise and it is more concerned with accuracy than speed. Though signs are looking up for the economy and most economists think the recession ended sometime in the middle of last year, broad risks remain. GDP began to grow again in the middle of last year, but fourth quarter GDP was still 2% below the peak it registered in 2008, adjusting for inflation. Meanwhile, last month the economy posted a big gain in jobs, but those numbers remain preliminary and could be revised.
Think of the committee as an oncologist treating a cancer patient. The preliminary tests may look good, but until the final results of the MRI come in, you don't want to declare that the cancer has been totally eliminated.