Arnold Kling  

Did the Recession End 15 Months Ago?

Not From the Onion... Why I Am Not a Left-Libertaria...

The official committee of the National Bureau of Economic Research says, "Yes." The New York Times asked "Really?" Many bloggers answered "no." I was one of them.

Employment declined by nearly one million workers in the four months after the supposed end of the recession. Even now, it is not clear that a recovery has started. To say that the recession ended 15 months ago is to tell a misleading story.

I have gotten so used to not thinking of economic activity as spending that I am totally blowing off the fact that GDP has been increasing for the past year. Instead, I focus on patterns of sustainable specialization and trade, which I think are better indicated by employment. We are still seeing employment growth that is below the trend rate of increase in the labor force, so the way that I think about it, we are still in a recession.

I raised exactly the same issue in August of 2003, when the NBER had pronounced that the previous recession ended in November of 2001. You could take that essay, change a few dates, update the numbers, and pretty much print it verbatim today.

Comments and Sharing

CATEGORIES: Macroeconomics

COMMENTS (11 to date)
Bob writes:

Jeff Frankels (he's on NBER) describes their decision to say the recession ended

david writes:

Thinkers who focus on GDP would note that GDP, despite increasing, has not returned to trend growth.

jobless recovery, etc.

Incidentally, Karl Smith at modeledbehavior criticized your interpretation of PSST recently.

Nobody Special writes:

The recession ended long ago, but the recovery has yet to begin.

Les writes:

It seems difficult to see the recession ending based upon GDP growth. A major component of GDP is government expenditures which have greatly increased. How can one demonstrate that government expenditures have been productive when unemployment remains high, government debt is extremely high, and unfunded government liabilities such as Medicare, Medicaid, and Social Security are formidable?

Bill writes:

[Comment removed pending confirmation of email address. Email the to request restoring this comment. A valid email address is required to post comments on EconLog.--Econlib Ed.]

liberty writes:

"Incidentally, Karl Smith at modeledbehavior criticized your interpretation of PSST recently."

Mr. Smith seems to suffer from a causation-correlation confusion. If "Everything Else" (taxes, regulation, etc) caused unemployment, you'd expect sales to fall.

This is a familiar Keynesian muddle. Sales don't just drop randomly, and then low-sales-themselves begin to wreak havoc. This aggregate-indicators-magic is purely illusory. Real factors cause real economic harm, including unemployment (a PSST issue), which then leads to the low sales that firms complain of.

Mike Rulle writes:

"On Budget" tax revenues are a pretty good indicator of economic activity. "Off Budget" taxes are SS and Medicare which taxes from the first dollar earned. On Budget taxes can be viewed as "marginal taxes" received based on real economic activity. 2010 estimate for on budget receipts is $1.53 trillion. 2007 peak was 1.93. 2009 was 1.45 trillion. This was the biggest percent drop since 1931---the forecast is for 2011 to go to 1.9 again---seems hard to believe. These are nominal dollars. (numbers from OMB)

fundamentalist writes:

Why choose gdp as the indicator of a depression? That's seems a little arbitrary. Why not employment? Most people couldn't care less about gdp and focus on employment. What good is gdp growth if net employment isn't increasing? As Dr Kling has often written, it's the gdp fetish.

Mike Rulle writes:

Since I was browsing OMB numbers, I noticed that "On Budget" spending is $3.2 trillion versus $2.3 trillion in 2007. Even more remarkable, outlays are double 2001, but receipts are equal to 2001.

I am surprised the Tea Party movement is as tame as it is.

matthew writes:

You are right, The recession has not ended. OECD has once again used rote thinking unthinkingly.

The proof is gold prices are rising rapidly continuing to make clear currency weakness. Food prices and fuel are once again rising stripping purchasing power for hard goods from the consumer. This bods badly for our economy.

One president allowed a poorly thought through "Bail-Out" and the next President created a Keynesian "Stimulus" that was "Top Down" which has never worked (see 1931). To make it even worse he politically targeted it to feed Union and government constituents instead of private employed citizens. Even Bill Clinton thought that was bad. "Bottom UP" Keynesian Stimulus had it been enacted may have worked

America has to determine if Capitalism per our Constitution or a Chinese Central Authority form of Capitalism is going to be our future model.

Currently our Government has grown 65x its size from 1910. Our population has only grown 3x its size. Approximately 54% of the working population is now paid directly from taxes, City, County, State, and federal Government.

We are primarily a services economy that must once again produce goods capitalistically.
These are the economic truths we have to determine.

Janise Robinson writes:

You are completely right.According to the government the recession ended in June of 2009. This has not been evident to the general public. Unemployment is still high and wall street "crashes" have still been a scare. The 18 month recession has been the longest since The Great Depression according to the NBER.
When CNNMoney surveyed some of the top econmonist the results were that there is a 25% chance of a "double-dip" recession in our near future and this is a rise from the chance being 15% just 6 months ago. This evidence is clearly stating that there is a contuining downfall in the economy and the recession is not over. A statement from NBER reads "the committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007" but how are Americans suppose to believe this when we have been struggling from the beginning of "The Great Recession" that supposdly ended in June of '09?

Comments for this entry have been closed
Return to top