The longest and deepest U.S.
recession since the Great Depression ended in June 2009, lasting 18 months, the National Bureau of Economic Research said.
“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,” the Cambridge, Massachusetts-based bureau's business cycle dating group said today in a statement. “The basis for this decision was the length and strength of the recovery to date.” The committee is the accepted arbiter of when recessions start and end.
Marked by a collapse in housing and sub-prime mortgage lending that triggered a global meltdown in financial markets, the downturn trailed the 43-month Great Depression that lasted from 1929 to 1933, surpassing the 16-month contractions of 1973- 75 and 1981-82. More than 8 million workers lost their jobs as a result of the
recession, a slump that may take years to fix.
“It's definitely the worst apart from the Depression, which was far, far worse,” Robert Hall, a Stanford University economics professor who heads the NBER committee, said in an interview. “It's still too early to tote up the cost, given that we are still far from recovered from its effects.
The panel's decision lagged behind declarations of other economists partly because it depends on payrolls, which were among the last economic indicators to rebound.
Another Decline
The committee also was also concerned about the potential of a further decline. The panel “has to guard against the possibility, even if very small, that what seems to be the beginning of an expansion is actually just an interruption in a longer contraction,” the group said in April.
Economic growth decelerated to an annualized 1.6 percent rate in the second quarter from 3.7 percent in the first and 5 percent in the last three months of 2009, according to the Commerce Department.
“The economy has begun to move forward, albeit at a slow, disappointing pace,” said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. “It's a recovery that feels fragile, and still raises questions about the risks to its sustainability.” The odds of the economy falling back into another
recession are about 25 percent, Kasman said.
Severity of Slump
The world's largest economy shrank 4.1 percent from the fourth quarter of 2007 to the second quarter of 2009, revised figures from the Commerce Department showed in July. Household spending dropped 1.2 percent in 2009, twice as much as previously projected and the biggest decline since 1942.
The National Association for Business Economics in October 2009 said the
recession had ended, while
Federal Reserve Chairman Ben S. Bernanke said in September 2009 the contraction “very likely” had ended.
Determining a date was complicated because economic growth resumed in the middle of 2009 while employment lagged behind, committee members said before the statement. The group typically takes six to 18 months after a
recession is over to make a declaration.
“The
recession was the worst since the 1930s,” Harvard University professor Jeffrey Frankel, another member of the committee, said in an interview in February. “Job loss was unusually severe relative even to output.”
Average Contraction
The previous contractions in the post-World War II era lasted 10 months on average.
The NBER business cycle committee was formed when Martin Feldstein, an economics professor at Harvard University, became president of the NBER in 1978. Feldstein remains a panel member, though he has retired as president, a position now held by James Poterba, an economics professor at the Massachusetts Institute of Technology. Hall has chaired the committee since its inception.
The committee doesn't just focus on gross domestic product to make its calls, shunning the informal definition of two quarters of declining output.
Instead, the panel identifies “a significant decline in activity” and uses a range of indicators to determine the dates, including gross domestic product, payrolls, incomes, sales and production, according to the NBER's Web site.
