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The NBER has finally declared that the recession of 2007 to 2009 ended in June 2009. As we noted here last year the economic data that the NBER use to track the recession turned up indicating that the recession ended in the summer of 2009. There are two brief points I would like to review: (1) understanding what the end of the recession means and (2) why there was some uncertainty about when it ended.
The NBER has a particular view of the nature of economic dynamics; they believe that the economy experiences a series of expansions and contractions whose starts and ends they can clearly identify. The reason that their findings are announced so far after the actual event (identifying the trough or cyclical bottom that occurred in June 2009 over a year later) is that they now believe that a new cyclical upturn started. Any significant drop in economic activity later this year (a so-called double dip) would now be part of a different recession. At some point in the future there will be clear evidence that a peak in economic activity has occurred and that the various indicators used by the NBER are declining. The expansion that began in June 2009 will have ended, and the NBER will then identify the start of the next recession.
My uncertainty about the dating of the recession and the reason that the NBER found that the recession ended a few months before my post indicated was that the NBER used some new data that they had not previously used. The new NBER data, monthly GDP estimates not publicly available, hit bottom sooner than the other data, thus they declared the end of the recession at the end of June rather than later in the summer when the rest of their data hit bottom.
[Note to readers] The economic upturn has had many consequences, including a refocusing of my energies on other projects besides this site. Future posting is highly uncertain and may occur as Milton Friedman said of monetary policy “with a long and variable lag”. Readers wishing my views on specific issues can contact me at firstname.lastname@example.org .