Is the Recession Over?

The National Bureau of Economic Research (NBER) has not yet declared an end to the recession. But no matter . . . according to the NBER, a recession ends when the economy has stopped contracting and begun expanding. In other words, the NBER could (and has) declared the end of a recession when the rate of aggregate economic activity (as measured by constant-dollar GDP) remains below its level at the beginning of the recession. That anomaly leads me to the following definition:

  • two or more consecutive quarters in which real GDP (annualized) is below real GDP (annualized) for an earlier quarter, during which
  • the annual (year-over-year) change in real GDP is negative, in at least one quarter.

That is to say, a recession lasts as long as there is a real and sustained dip in economic activity.

Here is my take on postwar recessions, which are marked by the vertical bars (click image to enlarge it):

Contrary to the NBER, there were no recessions in 1969-1970 or 2001. The Reagan-Volcker boom — which began in 1983 and was interrupted by the very mild recession of 1990-1991 — lasted until 2008.

To answer the title question: I don’t know if the recession is over, but I will know as soon as the Bureau of Economic Analysis releases its GDP estimate for the first quarter of 2010. Or, you can wait until the NBER makes its call in 2011.