The National Bureau of Economic Research (NBER) has confirmed what most economists have been saying for almost a year. The recession that began in December 2007 came to an end in June 2009.
Though the economy has been on the road to recovery for about 15 months, it has been a bumpy ride that is being seen mostly in the economic data and not by the majority of U.S. households.
The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months, according to the NBER.
“In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month,” the NBER said.
“The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.”
It was decided that a new recession would not be “a continuation of the recession that began in December 2007” due to the length and strength of the recovery to date.
This only means that a new downturn in the economy, if it occurs in the near term, would not technically be considered a “double-dip recession” but a new recession.
A recession unlike recent slumps
Unlike past recessions, which were brought on by tight monetary policy, this recession was triggered by a bubble in the housing market and a near collapse in the credit markets.
Slumps that come about from tight monetary policy are normally followed by more robust recoveries when interest rates fall because the conditions that brought about the recession are no longer in place.
However, a recession that springs from a financial panic has typically been followed by a lackluster recovery, as households repair damaged balance sheets and key in on savings, while an accommodative monetary policy isn’t all that effective.
Unfortunately, history suggests that this recovery may continue to plod along for several years, which is not good news for those looking to switch jobs or find gainful employment.
For more information about current issues impacting the economy, including a look a report released today detailing the struggles home builders are facing: Please see Tomorrow’s Economy Today.
Additionally, a look at how the recession and subsequent recovery has affected the job market is also available.