Monday, September 20, 2010 0 comments

Longest US recession since the Great Depression ended in June 2009

An Associated Press story via The Toronto Star:

The longest recession the United States has endured since the Great Depression ended in June 2009, a group that dates the beginning and end of recessions declared Monday.

The National Bureau of Economic Research, a panel of academic economists based in Cambridge, Mass., said the recession lasted 18 months. It started in December 2007 and ended in June 2009. Previously the longest post World War II downturns were those in 1973-1975 and in 1981-1982. Both of those lasted 16 months.

...

Any future downturn in the economy would now mark the start of a new recession, not the continuation of the December 2007 recession, NBER said. That’s important because if the economy starts shrinking again, it could mark the onset of a “double-dip” recession. For many economists, the last time that happened was in 1981-82.

To make its determination, the NBER looks at figures that make up the nation’s gross domestic product, which measures the total value of goods and services produced within the United States. It also reviews incomes, employment and industrial activity.

The economy lost 7.3 million jobs in the 2007-2009 recession, also the most in the post World War II period.

The Great Depression lasted much longer. The United States suffered through a 43-month recession that ended in 1933. Then, it slid back into recession, which lasted for 13 months. That ended in 1938.
Unlike some countries, the official towncrier in USA uses metrics other than GDP change to mark recessions. The fact that the recent recession was the longest since the 1930's is not that important. Instead, I believe the most important fact is that the economy hasn't recovered much. Although unemployment is a lagging indicator, I still think it is fairly high from a historical point of view. Unlike most of the past recessions, when central banks "induced" a recession by raising rates, the recent one is one of the rare ones where rates were the least of the problems.
 
I don't think a double-dip recession is likely given the present low level of economic activity. The real risk is that the economy doesn't grow much, perhaps no better than 2% per year for next 5 to 10 years.

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