NBER Declares Bush Recession Not Officially Over - Yet
On Monday, the National Bureau of Economic Research (NBER), the nonprofit group which officially marks the birth and death of economic downturns, announced that the Bush Recession which commenced in December 2007 isn't over, at least not yet. Despite the promising signs of economic growth, job creation and a bull market, the NBER arbiters of the nation's business cycle have concluded for now that "the evidence is not so easy to decipher."
Not that there isn't growing optimism, if not triumphalism in some quarters, about the recovering economy. Last week, Harvard economist and NBER committee member Jeffrey Frankel declared, "The recession is over." On Friday, the New York Times' Floyd Norris asked, "Why So Glum? Numbers Point to a Recovery." The next day, Daniel Gross in Newsweek proclaimed the U.S. "the Comeback Country," offering an explanation for "How America pulled itself back from the brink--and why it's destined to stay on top."
But the Obama White House, burned by its overly optimistic early predictions about the depths to be reached by the recession, has refused to pronounce its conclusion. And as the New York Times reported, the NBER has withheld judgment as well:
The committee plans to announce on Monday that it cannot yet declare an end to the recession that began in December 2007, several members indicated on Sunday. Such an acknowledgment is rare in the history of setting dates to business cycles and could affect the behavior of investors and consumers.
Despite a recent uptick in employment and income, the decision of the committee at a meeting on Friday reflects a lingering worry that the economy could turn downward again in a so-called double-dip recession.
Several economists on the committee, which has seven active members, said they considered such a turn to be unlikely. But, they said, the duration and severity of the contraction have made it hard to determine with authority that a recovery has begun.
Those concerns were also echoed Monday by the AP Economic Survey. Following the joint statement by Obama officials Timothy Geithner, Christina Romer and Peter Orszag that "We do not expect further declines in unemployment this year," the AP survey of private, corporate and academic economists concluded that the recovery would "remain sluggish in 2011." Like the Obama administration, the AP Similarly forecasting GDP growth for 2010 at 3 percent. But the economy will still be plagued by slow job growth and the protracted woes of the housing market:
Home prices will remain almost flat for the next two years, even after plunging an average 30 percent nationally since their peak in 2006. The economists forecast no rise this year and a 2.3 percent gain next year.
The economy will grow 3 percent this year, which is less than usual during the early phase of a recovery and the reason unemployment will stay high. It takes growth of 5 percent for a year to lower the jobless rate by 1 percentage point, economists say.
By the simple measure of gross domestic product, the second Bush recession ended with the robust growth of final quarter of 2009 and the first three months of 2010. "But," the Times noted, "The committee takes other factors into consideration, like employment trends and consumer confidence." Robert Hall of Stanford and NBER acknowledged, "The odds favor the view that a true expansion has begun and that the recession beginning in 2007 is over," but added, "one cannot totally rule out the unlikely possibility that the economy might resume contraction again soon."
There is one other factor working against the declaration of the recession's end: politics. In a rare moment of bipartisan consensus, neither party wants to announce mission accomplished. Republicans, of course, want to bad mouth the economy and use the stimulus (despite its success) to bludgeon Democrats during the 2010 midterm elections. For their part, Democrats and President Obama are not only wary of repeating last year's overly positive assessments, but still want to pass new jobs programs in Congress. Even though the public still blames George W. Bush for the steep economic decline, it's too early for Barack Obama to take credit for ending it.
In coming days, the debate over whether we have reached the end of the tunnel will continue. For his part, it was only with the news the economy added 162,000 jobs last month that President Obama allowed himself to announce, "The tough measures that we took -- measures that were necessary even though sometimes they were unpopular - have broken this slide and are helping us to climb out of this recession."
Call it the beginning of the end.