(Note: I made some parenthetical notes of clarification to this post about three hours after it was first published. Nothing that changes its points. Just some refinement to what I meant.)
OK. It’s official. The official recession-calling panel (The Business Cycle Dating Committee of the National Bureau of Economic Research – NBER) has met and issued the official declaration that the US has been in a recession since December 2007. For those who are confused by math, that means we are, as we speak, 12 months into a Recession.
What is a Recession? Well, most definitions say something about two consecutive quarters of declining economic activity, but according to the official Recession committee, the definition is this:
“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income and other indicators…it begins when the economy reaches a peak of activity and ends when the economy reaches its trough.”
So, let’s get this straight. According to the authority that actually decides these things, we know these two following things:
1. A Recession begins when the economy reaches a peak and ends when the economy reaches the low point.
2. The current Recession has now lasted 12 months.
So much for the backward looking data, I want to know what the future holds.
Unfortunately, according to the article I’ve linked to above, “The NBER makes no forecast on how long a recession will last, but said that in the past they have run from six to 18 months.”
The NBER website actually includes information about the history of economic cycles, but unfortunately, the NBER website is currently slammed and unavailable, so I’ll link to this CNBC article from 2007 about the history of U.S. Recessions from which the accompanying chart is taken.
So, here’s what we also know:
3. The NBER indicated to at least one reporter that past recessions last from six to 18 months.
4. Data from the NBER indicates that, depending how you state it, you can claim the following:
a. During the past 100 years, Recessions have lasted from 6-43 months.
b. During the past 100 years, Recessions have lasted an average of 14.4 months.
c. Since World War II, Recessions have lasted an from 6-16 months.
d. Since World War II, Recessions have lasted an average of 10.2 months.
5. If you include data from the Great Depression, the average Recession lasts 14.4 months.
6. If you include data since World War II, the average Recession lasts 10.2 months.
(Later: Bloomberg, in this article, says this contraction already the longest since 1982 and that if it lasts for another five months, which is consistent with Fed and private forecasts, it would become the longest since the Great Depression.)
Having observed the coverage of the current economic crisis, meltdown and worst economy since the Great Depression, I feel certain that the coverage of today’s numbers will point towards something a lot worse than merely another two months of Recession. And I’m sure that some people will call me ridiculous if I suggest we’ve already hit the bottom (as in, “the end of the definition of what is officially “the end” of a Recession).
So I’ll merely predict this: I believe the Recession is nearing its end. (Later: I need to refine my definition a bit to say that I mean the contraction is closer to the end than to the beginning; that it is more than halfway to its end.) I believe that we were actually heading out of it on September 15 and it has been extended and exacerbated because of the hyper-coverage of the economy during the past three months.
I believe that this is the first time in my life that to believe as I do — to even consider that the economy is slowly improving and not crumbling — is rejecting the conventional wisdom to such a degree as to be classified a cynic. Well, I am. It may not be prosperity I see right around the corner, but it’s not a Depression either.
An additional thought: The article to which I pointed above includes this nugget: The NBER has no definition of a Depression. There’s either economic growth or economic decline.
In other words, “Depression” is not an official economic term as defined by the official economic cycle calling body. Apparently, it is a label for an emotional response to a deep Recession.
I think we should come up with a similar word to describe our emotional response to an average Recession: Perhaps, a Melancholy. Maybe what we’re going through is a worse-than-average Recession, so perhaps we should call it, a Great Melancholy.