To those who believe the economic downturn in the US ended in the middle of last year, the official arbiter of recessions had this to say yesterday: not so fast. The National Bureau of Economic Research (NBER) said it had considered months of data on growth, unemployment and business activity but could not say for certain where the bottom of the cycle really lay.
"Although most indicators have turned up, the committee decided the determination of the trough date on the basis of current data would be premature," it said. "Many indicators are quite preliminary at this time and will be revised in coming months."
The NBER does not quite take the approach to history of Zhou Enlai – the Chinese leader who, when asked in the 1970s to discuss the impact of the French Revolution of 1789, declared it was "too soon to say" – but it is known for taking many months to pontificate on the duration of recessions. To further complicate matters, it does not take the European common definition of a recession as two consecutive quarters of economic contraction. Instead, it takes into account four factors: personal income, unemployment, industrial production and the volume of sales in the economy.
Many indicators show the economy in better health. Forecasters believe GDP rose at an annual rate above 4 per cent in the first quarter of 2010, and the Dow Jones Industrial Average passed 11,000 points last night for the first time since September 2008 – but unemployment remains close to 10 per cent.
The NBER's business cycle dating committee, made up of eight of the bureau's senior economists, met last week to consider whether it was time to declare an end date for a slump that began in December 2007 as problems in the US housing market spilled over into the rest of the economy. If the end is pinpointed later than June of last year, it will be officially be the longest recession since the Great Depression.
During the last recession, which ended in November 2001, the NBER waited until July 2003 to make the determination, in part because unemployment continued to rise well after the business cycle had turned.Reuse content