{"id":525373,"date":"2010-04-12T13:15:55","date_gmt":"2010-04-12T17:15:55","guid":{"rendered":"tag:www.economist.com,21005987"},"modified":"2010-04-12T13:15:55","modified_gmt":"2010-04-12T17:15:55","slug":"it-is-obvious-the-recession-is-over","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/525373","title":{"rendered":"“It is obvious the recession is over”"},"content":{"rendered":"

ECONOMIST Robert Gordon, a member of the NBER recession dating committee, has released some comments on the decision made last week not<\/em> to declare an end to the recession. In his view, the recession is clearly finished:<\/p>\n

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Real GDP has recovered strongly from a trough in 2009:Q2 and by 2010:Q2 (the current quarter) will have reached (or be very close to) its value reached in the peak NBER quarter of 2007:Q4, according to forecasts of private organizations that so far have proved to be remarkably accurate in forecasting real GDP changes a quarter or two in advance.. <\/p>\n

The committee also considers real GDI (the income-side measure of real GDP).  For reference, this appears in the NIPA tables as Table 1.7.6 line 11.  Most macroeconomists think that the BEA should feature this measure more strongly.  Real GDI was at essentially the same level in 2009:Q2 and 2009:Q3, and then rose strongly in 2009:Q4 as did real GDP.  The issue of whether the economy troughed in 2009:Q2 or 2009:Q3 is settled by the average of real GDP and real GDI, which reached its trough in 2009:Q2. <\/p>\n

Real GDI is an important variable.  It reached its peak in 2007:Q4 which ratifies the BCDC decision about the date of the peak.  While it did not rise from 2009:Q2 to 2009:Q3, it rose strongly in 2009:Q4 and will presumably rise strongly in the first half of 2010.<\/p>\n<\/blockquote>\n

The end date of the recession is equally clear:<\/p>\n

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The traditional measure of production used by the committee is the Federal Reserve Board Index of Industrial Production (IIP), which reached a well-defined trough in June 2009.  For those who object that the IIP refers only to about 15 percent of the economy, the broader monthly measure real manufacturing and trade sales also reached its trough in June 2009.  The private firm Macro Advisers has constructed a measure of monthly GDP that is available back to 1992, and this also indicates a cyclical trough in June 2009.  While real GDI is flat across 2009:Q2 and 2009:Q3, quarterly real GDP reaches its trough in 2009:Q2, as does the average of quarterly real GDP and real GDI.   Thus we have three monthly measures that reach a trough in June, the average of two measures of aggregate economic activity which reach their trough in 2009:Q2, and no clearly defined troughs occurring later than that in any series other than the traditional lagging data on aggregate hours of work and total employment.<\/p>\n<\/blockquote>\n

So why didn’t the committee make an official judgment?<\/p>\n

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The committee viewed the likelihood of a double dip that would take the level of real GDP back below its previous trough of 2009:Q2 as extremely unlikely.  However, the committee thought that, even if that probability was extremely small, it would be very costly to the committee to be proved wrong after the fact. Thus the committee was swayed by the view that the low probability of a double-dip multiplied by the high cost of being wrong in declaring the recession prematurely still amounted to a significant potential cost.<\/p>\n<\/blockquote>\n

And so it seems likely that once additional data have come in, further reducing the probability of a large and imminent decline in output, the committee may feel comfortable making a declaration about the recession. As it stands, it looks as though the American economy has been out of recession for a solid three quarters.<\/p>\n

UPDATE:<\/strong> Incidentally, were the June 2009 trough to hold up, that would make this latest recession, at 18 months, the longest since the 43 month downturn from 1929 to 1933. The previous two recessions were 8 months each, and there were 16 month recessions from 1973-5 and from 1981-2.<\/p>\n","protected":false},"excerpt":{"rendered":"

ECONOMIST Robert Gordon, a member of the NBER recession dating committee, has released some comments on the decision made last week not to declare an end to the recession. In his view, the recession is clearly finished: Real GDP has recovered strongly from a trough in 2009:Q2 and by 2010:Q2 (the current quarter) will have […]<\/p>\n","protected":false},"author":4534,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-525373","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/525373","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4534"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=525373"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/525373\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=525373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=525373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=525373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}