They Say the U.S. Recession Ended Over a Year Ago

Economics / US Economy
Oct 02, 2010 - 02:13 AM

By: Hans_Wagner

The National Bureau of Economic Research (NBER) told us the recession ended June 2009, when economic activity stopped going down and turned up.

The problem is most people are still worried about their jobs, if they have one and the lackluster performance of the recovery so far. With unemployment fluctuating between 9.4 and 10.1%, and the underemployment rate near 17%, it is no wonder the news from the NBER received such skepticism. Even the Federal Reserve said consumer demand, bank lending and housing remain weak, especially for this stage of the recovery.

Consumers, large and small businesses face an uncertain future. Companies of all sizes are reluctant to hire additional people for fear they will encounter much higher healthcare costs along with new taxes. In place of hiring new people, most companies would rather invest in productivity improvements, as they will help lower costs and improve service.

Congress has not yet decided what they will do with the expiring tax cuts in 2011. Add worries about the upcoming election in November and what that might mean for future legislation. It is no surprise everyone lacks confidence in the direction the economy.

Recessions generally take place when the GDP turns negative for two quarters. When the GDP recovers turning positive, it is a sign the Recession is over.

Generally recover from recessions follows a robust path as growth accelerates in the early quarters and years. This time the pattern is different. Starting with the third quarter of 2009 the GDP grew at 1.6% before leaping up to 5.0% in the Q4 2009. So far so good. In the first quarter of 2010, the GDP growth rate slowed to 3.7%, followed by a meager 1.6% in the second quarter. This is why we hear many economists worry about a “double-dip recession.â€