Source: Bianco Research
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In the past we have noted that Martin Feldstein, one of the members of the business cycle dating committee, was the holdout in calling the end of the Great Recession. The committee works by consensus and Feldstein was not sure that the current economic expansion would make a new high. He relented and the Great Recession’s end was dated June 2009. The official call was made on September 20, 2010. For the moment, it looks like his first instincts were partially correct as a case can be made that the Great Recession never really ended.

The NBER has dated every recession back to 1854. A recession is a peak to trough in economic activity where the expansion off the trough results in a new high in real economic activity. This has been the case in every recession/depression/panic ever dated. Even the 1937 peak in economic activity (which began the 1937 recession) was above the 1929 peak (which started the Great Depression).

As the chart to the right shows, real GDP had its biggest fall since the end of WW2 (see the lower panel highlighting the drawdowns). More importantly, real GDP has made a new high in economic activity. If the economy continues to falter, then this is not a “double dip” but rather a continuation of the Great Recession. Now to be clear, the ultimate trough most likely already occurred in June 2009, which is how recessions are dated (peak to trough). However, the recession does not truly end until economic activity makes a new peak. For the moment, that has not happened. One could argue that August 2011 is the 44thmonth since the Great Recession began (December 2007). Only the Great Depression (which lasted 43 months from August 1929 to March 1933) and the Panic of 1873 (65 months from October 1873 to March 1879) took longer to make a new peak in economic activity.

Category: Cycles, Economy, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

31 Responses to “Is The Great Recession Really Over?”

  1. MayorQuimby says:

    These charts are all nice and everything but we are trying to inflate a credit bubble with a hole in it.

    It won’t work and so we’re screwed.

    We MUST let prices fall, encourage savings and back all capital formation with solid collateral.

    We need boring, old school economics and must rid ourselves of the neo-Keynsian imbalances and perversions that pervade our national economic discourse at present.

  2. Nuggz says:

    Based on consumer spending, I would say yes.

    On a different note, the fact that the markets are worried about the European banking system just fascinates me. As if, somehow, it was healthier 15 years ago.

    Also, I am going out on a limb and calling this a bottom for US housing.

  3. Veneziano says:

    While GDP is closing to coming back to its old high, many other indicators look worse.

    From Calculated Risk – real personal income, industrial production and employment all look craptacular.

    http://www.calculatedriskblog.com/2011/08/recession-measures_30.html

  4. ilsm says:

    Mr Mayor,

    Housing (land rents) prices need to collapse.

    I rather encourage domestic work, savings has to come from income.

    Rather use capital for “things” rather than financial “assets” aka gambling.

    Must rid ourselves of the supplysiders and monetarists, as well.

  5. JohnnyVee says:

    With the national debt at $14T or higher and interest rates a Zero, one could argue we haven’t had real growth in 30 years. It’s all been artificial. So, handwringing about what these charts been in the abstract may be fun, but not helpful.

  6. MayorQuimby says:

    JohnnyVee wins the thread.

    Yes – you need to subtract $14 TRILLION of gdp from the past 30 years to see how well we REALLY did.

  7. DMR says:

    So, in response to a post on real GDP, the comments are about the price level, housing prices, and the national GDP. What about REAL GDP (i.e. product that has already been normalized by price) is so hard to understand? The post asks about whether real GDP will see a lower trough before it regains pre crash levels. Let’s try this again. :)

  8. tagyoureit says:

    13 Thousand Trillion? Am I reading that correctly, 13 Quadrillion?

  9. mark says:

    “More importantly, real GDP has made a new high in economic activity”

    @DMR

    Assuming the above sentence should read “has not made”, as of today of course Jim Bianco is correct. As far as the question of a new low in real GDP goes, I thnk the 1873 record will be broken. My own model has been and remains not the 1930′s but rather Japan post 1990/US post-1873. I’ve yet to see a reason to change my view.

  10. RW says:

    With total debt approaching GDP, what the country produces in a single year, the US could hardly be considered a basket case — the ratio has been this high and indeed much higher before — but high unemployment, stagnant wages/disinflation, and painfully slow recoveries muddy the water. Even before mis- and mal-feasance in the FIRE sector and its regulators led us over the cliff into a major credit panic and balance sheet recession this pattern of weak recoveries has been building for awhile now; e.g., even though the gains in employment and GDP under Clinton were among the largest in US history the recoveries from downturns were still slow (just eyeballing this, no detailed analysis).

    NBER is the nationally recognized adjudicator of economic climate and so, as a historical matter, their conclusion that the previous recession ended (making the current downturn a second) will probably stick but whether disinflation endures or not, the ‘new normal’ of increasing recovery tardiness may lead them to reassess their methodology, at least as far as timing goes.

    NB: John Rutledge wrote a nice little article on the US balance sheet a couple years ago and the basic upshot is if someone is going to trot out a total debt number like $14 trillion they should also mention that the total US asset number is over 14 times larger (somewhere in the neighborhood of $200 trillion).

    If the US were a business or a family that debt to asset ratio would entice serious investment and/or the envy of the Jones.

    But since the US is neither a business nor a family some knowledge of basic national accounting is more useful than magnitude shock when discussing these kinds of numbers, particularly in the context of a dominant country whose currency and bonds are in such heavy demand worldwide that it gets paid a premium (negative real interest rates) for producing them.

  11. machinehead says:

    This is like debating ‘what is a new bull market’? If you use an explicit definition — such as a 20% rise off a trough — then you know in real time if the criterion has been met.

    Otherwise, if the definition of ‘bull market’ is that a new high must be set (nominal? real?), one will not know until l-o-n-g after the trough whether it’s a bull market or not.

    Most investment managers would say that semantic labels such as bull and bear market are irrelevant anyway — they’re entertainment for the MSM and the peanut gallery of chatterers. I feel the same way about ‘recession.’

    For damned sure, the worst possible way to make such a determination would be to convene a standing committee of egghead high priests who work by consensus. How do we know that they aren’t just circle jerking to chart porn behind closed doors? Huh, huh??

  12. brianinla says:

    You can rejigger the GDP deflator to be anything you want so the charts above are as worthless a construct for evaluating the economy as GDP itself. As a profession economists are lower than lawyers and just above real estate agents.

  13. Ted Kavadas says:

    By various measures, the “Great Recession” appears to be a euphemism.

    For example, some of the latest consumer confidence/consumer sentiment charts show very subdued readings – very atypical for an economic recovery. I’ve posted them at my blog post here:

    http://economicgreenfield.blogspot.com/2011/09/confidence-surveys-another-view.html

  14. mark says:

    @RW

    “If the US were a business or a family that debt to asset ratio would entice serious investment and/or the envy of the Jones.

    But since the US is neither a business nor a family some knowledge of basic national accounting is more useful than magnitude shock when discussing these kinds of numbers, particularly in the context of a dominant country whose currency and bonds are in such heavy demand worldwide that it gets paid a premium (negative real interest rates) for producing them.”

    You are absolutely correct but that won’t stop the inflationistas and tea baggers from trashing you (some might even intellectually engage your argument but I won’t bet on it).

  15. Frilton Miedman says:

    It’s not Keynsianism that got us here, nor even monetarism, it was blind Austriansim without checks and balances. (checks/balances in Austrianism = an oxymoron, yeah I know)

    It’s the thirty year Ayn Rand “Free market” experiment that failed to factor wealth disparity, imbalances, excessive credit to fuel consumption without real wages to support it that got us here.

    In other words, our politicians in conjunction with “fine minds” like Greenspan, Laffer and the “unbiased” corporate funded Heritage Foundation, completely ignored the hard learned lessons of Marriner Eccles through the great depression, simply relabeled old mistakes with new names (like “trickle down”) at the behest of wealthy campaign financiers.

    I felt a slight pinch of hope last night, only for the fact that Obama openely iluminated the difference between small business and multi-national corpoations.

    To date, we’ve been pummeled with anti-regulatory and tax policy for business growth and “job creation” that has little or no benefit to small business, but a world of benefit to multinationals.

    That single, simple distinction Obama made last night, between small business and corporation, changes everything…it brings the problem out into the sunlight instead of allowing massive corporations to hide their agenda behind the real “job creators” by abusing their buying power through the D.C. lobby. (legalized bribery)

  16. AHodge says:

    james
    ‘real GDP has made a new high in economic activity’
    this is a typo you meant
    has NOT made a new high
    tho you get it right later
    while yours is not a bad definition double dip is NEVER a single recession as NBER dated

    if you dont like their definition fine–it aint a science, they keep fine tuning their methodology, adding GDP etc, to the extent they have one.

    this is a sloppy unagreed concept like L shaped recovery and not worth perseverating
    1 it could be a time length
    2 it could be your view–though if that is right 1980 1982 was not double dip because new high hit. want to say that?
    3 if you take a 2 consec qtrs of real US GDP view like the rest of the world does. about half of our recessions have a qtrly GDP plus interspersed–those are often called double dips. last i looked the 2001 recession had
    down/ up/ down/ up/ down Qtrs. TWO double dips.
    4 if– like i do— you think a Growth recession/ subpar growth cycle definition is useful,
    you could say the whole last five years is a recession/ growth-recession Double Dip
    with only 3Q 2009-1Q2020 as a real recovery

    but fine tuning what we have is only annoying most of the readers who know perfectly well we are f….d

  17. AHodge says:

    you could also define it as renewed slump where a normal boom and its excesses–which normally “cause” recessions — never really got going again, clearly now.

  18. AHodge says:

    or from the onion of Aug 3
    Drunken Ben Bernanke Tells Everyone At Neighborhood Bar How Screwed U.S. Economy Really Is

    if you want to improve your table 1
    i would add different shaded growth recession periods and put it on a log scale

  19. ashpelham2 says:

    Particularly since the market bubble and pop of 2000-2001, no growth could be said go be organic. It’s all been debt fueled. There is no 1 thing that hurts the economy, but there are some questions that consumers need addressed before they come out of the woods:
    What is the future of energy prices?
    What is the future of our jobs?
    What will the next president, in 1 year or 5, do to lead America?

  20. constantnormal says:

    “One could argue that August 2011 is the 44thmonth since the Great Recession began (December 2007). Only the Great Depression (which lasted 43 months from August 1929 to March 1933) and the Panic of 1873 (65 months from October 1873 to March 1879) took longer to make a new peak in economic activity.”

    One could also argue (not really an argument, but rather a statement of fact) that since the current depression has not yet recovered to the previous economic peak, that the clock is still running on this one … it could easily take the crown and relegate the Great Depression into second place … yes, the level of severity is not so great, as we have not (yet) adopted the insane austerity measures that really wrecked the economy of the 30s, and we have the social safety nets that were installed after the pain of the 30s (at least so far). But the Tea Party and Repooblicans are busily working toward taking us back to those glorious days of yesteryear …

  21. Petey Wheatstraw says:

    RW Says:

    “NB: John Rutledge wrote a nice little article on the US balance sheet a couple years ago and the basic upshot is if someone is going to trot out a total debt number like $14 trillion they should also mention that the total US asset number is over 14 times larger (somewhere in the neighborhood of $200 trillion).”

    So, why are we borrowing money in the name of the middle class taxpayer if we’re so goddamned rich?

  22. Depression? It may be fun to try and call this a Depression because the contraction lasted at least 8 quarters. Unfortunately, the downturn did not meet the requirement of Real GDP averaging lower than -4%.

    Great Depression? Sorry wannabees, -8% avg for at least 16 quarters…

    Recession Indicator charts: http://trendlines.ca/free/economics/RecessionIndicatorUSA/USA-TRI.htm

  23. RW says:

    @mark, arguing with inflationistas can be interesting now and then, particularly when they know more about national accounting or the crucial differences between macro- and micro-economics than I do (which is not a great stretch) but emphasize different variables; I can learn something then although the problem of definition — e.g., what exactly is inflation — can get in the way of a good wrangle. I don’t waste time on tea-party types any more though: their tendentiousness and the pride they take in their ignorance makes them boorish and ineducable.

    @Petey, I’ll bet you already know the answers to that and are just putting some dents in my shoes here but, really (and in the same spirit), if you were an oligarch and receiving the bulk of the proceeds from that debt to add to your already considerable assets who else would you prefer to be on the dotted line as the named debtor?

  24. Joe Friday says:

    Freddy,

    What’s a depression have to do with negative GDP ?

    During the Great Depression, which lasted a decade from 1929 to 1939, GDP was +10.4% in 1934, +8.9% in 1935, and +13.1% in 1936. The national economy went in and out of recession more than once while remaining in a depression.

  25. miamiocean says:

    @RW you are a breath of fresh air.

  26. mark says:

    @Joe Friday

    I kind of understand what you’re getting at: a depression is made up of a series of small recessions resulting in a long period of economic weakness. However, those numbers you quote are year-over-year. I’m working from memory but there was an approx. 30% drop in GDP from ’29-’33. Let’s say 100 down to 70. A 10% y-o-y increase from there gets you back to 77. A nice year but nowhere near back to the peak of ’29. Based on my memory of 30%, you’re numbers get back to about 94 – 95% of the peak. That still only brought unemployment down from about 25% to about 16%. Again very far from 1929 levels. Then came 1937. It’s of note also that the ’30s did not become generally known as the Great Depression until sometime mid-decade (the period of 1873 – 1895ish had previously been known as the Great Depression and is now more commonly referred to as the Long Depression).

  27. Giovanni says:

    @Mark, like @Joe Friday my sense is that when look back at this period whether or not we double dipped will be a minor minor compared to whether or not this turns out to be the new Great Depression. Maybe it would get a more up to date spin like GD3 but the double trough seems very similar to the thirties, the only questions seems to be one of duration.

  28. Giovanni says:

    a minor *issue* compared to…

  29. By some strange coincidence, the 1929 to 1933 era saw both GDP & CPI collapse 25% & Unemployment rise to 25%. The Great Depression’s GDP averaged -7.3% over 43 months (14 quarters). The Great Recession is a mere puppy in comparison by all measures except real estate (-32% 2006-2011).

  30. [...] If we contract again James Bianco says we will in the future consider this one great contraction, not two, in “Is the Great Recession Really Over?” [...]