NBER: U.S. recession ended June 2009

On Monday (Sept. 20), the national group responsible for officially marking the beginning and end of economic depressions and recessions said June 2009 technically marked the end of a recession that began in December 2007.

Greg Kaza said the same thing in a November 2009 memo to The City Wire.

Kaza, economic researcher and executive director of the Arkansas Policy Foundation, wrote in his November memo that improved data related to industrial production, income, sales and GDP suggests the recession ended in June 2009. He said at the time the recession was the longest recessionary period of post-World War II period and longer than the average length of recessions dating back to 1854.

The National Bureau of Economic Research, the official marker of U.S. economic cycles, said this in the opening statement of their Monday press release: “The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.”

According to NBER, there were 32 economic “cycles” (recessions or depressions) between 1854 and 2001, with the average recession/depression lasting 17 months. However, the U.S. post-World War II economy has seen only 10 cycles, with an average length of 10 months for each recession.

Obviously, the NBER takes time to make a call. It was in a December 2008 statement that the group announced that this recession began in November 2007 — now revised to December 2007.

A recent The Consumer Compass Report survey indicates that people in the Fort Smith region are not sure the economy has improved or will improve. More than 40% of Fort Smith regional residents surveyed in the inaugural survey say their personal financial situation is worse than it was a year ago. What’s more, 35.5% of those surveyed expect their personal financial condition to worsen in the next 12 months. The survey also found that 58.5% of respondents believe the U.S. economy will be worse in the next year.

Kaza said Monday it’s understandable for people to think the national, state and local economies may still be on a recession track. He said the early part of recoveries are “jobless,” and the decline in retirement funds and housing values also take time to recover.

In a jobless recovery the economy is technically expanding but not at a fast enough pace to generate employment growth, Kaza explained in his November memo. The NBER identified a recession between March and November 2001 but employment declined for another seven quarters before finally reaching a trough in August 2003. Monthly U.S. employment declined an average 691,333 (1Q 2009); 428,333 (2Q); and 225,666 (3Q).

Also, the July 1990-March 1991 was also marked by a jobless recovery.
“Recovery periods following both those recessions were characterized by continuing job losses, so there is some precedent for what is happening right now in terms of a recovery with little or no job growth,” noted Kaza’s November memo.

Monday’s NBER statement speaks to the delayed effect of economic recovery, noting: “The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.”

Although tax collections in Arkansas and the Fort Smith metro area show signs of improvement, unemployment rates have been inconsistent.

The annual average jobless rate for the Fort Smith metro during 2009 was 7.9%, considerably higher than the 4.8% rate in 2008 and the 5.3% rate in 2007. In June 2009, the metro jobless rate was 8.2%, rising to 8.9% in January 2010 before settling back to 7.8% in July.

In Arkansas, the highest jobless rate during 2007 was 5.3% (July, August and September), the highest rate during 2008 was 6.3% (December), and the highest rate during 2009 was 7.6% (November and December). During 2010, the state’s jobless rate rose to 7.8% in March and April, and fell back to 7.4% by July.