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Recession Likely to Be Over By the Summer

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  • Recession Likely to Be Over By the Summer

    There's no hedging here with what the ECRI is predicting!

    CARPE DIEM: ECRI: Recession Likely Over By End of Summer

    NEW YORK, April 30 (Reuters) - The longest U.S. recession in a half century will probably end before the summer is out, the Economic Cycle Research Institute said on Thursday.
    The research group, whose leading indicators have a solid track record of predicting turns in the business cycle, said enough of its key gauges have turned upward to indicate with certainty that a recovery is coming.

    Lakshman Achuthan of ECRI states: With the level of the Weekly Leading Index in an upswing for seven weeks now (see top chart above), an end to the U.S. recession is now in clear sight. -- The end of this recession -- the most severe downturn since World War II -- is finally in sight. This is the clear message from Economic Cycle Research Institute's array of leading indices of the U.S. economy.

    The "giant error of pessimism" is now rampant. This is why many will be blind to the light at the end of the tunnel that marks the exit from this recession. But to ECRI's array of objective leading indices, designed specifically to spot recessions and recoveries, the end of the recession is now in clear sight.
    "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

  • #2
    Originally posted by Shek View Post

    There's no hedging here with what the ECRI is predicting!

    I wonder how he factors in "government meddling" being that's kind of a wild-card


    • #3
      Perhaps earlier?
      The Recession Is Over
      Brian S. Wesbury and Robert Stein, 05.05.09, 12:00 AM EDT

      Indicators point to a fast-approaching end date: May 2009.

      If you want a bone to pick--or an economic argument to have--it should be about when the current recession actually began. The National Bureau of Economic Research, the U.S.'s semi-official recession arbiter, says it started in December 2007. But real gross domestic product grew at a 1% annual rate from then through August 2008. That doesn't look like a recession to us.

      Nonetheless, when Lehman Brothers ( LEHMQ - news - people ) collapsed and the $700-billion TARP plan was proposed, a very rare "panic" ensued. Monetary velocity collapsed. From September 2008 through March 2009, the economy shrank at a rate of 5.5%. That's why we think the recession started in September 2008, not in December 2007.

      Once the "real" recession started--the one that began in September--we consistently forecast it would be over by mid-2009, earlier than many (including the Federal Reserve) predicted. Now it looks like our V-shaped recovery is underway. When the NBER eventually gets around to declaring the recession end date, we think it will be May 2009.

      New claims for unemployment insurance are probably the very best single indicator of the end of a recession. The monthly average for claims normally peaks one or two months before the economy bottoms--and it appears to have peaked in March, at 658,000, versus April's 635,000.

      Also, given that the September recession was marked by consumer spending falling off a cliff, we look at this measure to signal a rebound. Consumer spending grew at a 2.2% annual rate in the first quarter, and it looks set to rise again in the second quarter. Meanwhile, both major measures of consumer confidence (from The Conference Board and University of Michigan) shot upward in April.

      The housing market is also showing nascent signs of life. New home sales bottomed in January at a 331,000 annual rate, but the pace of sales in February/March averaged 357,000. After falling 80% from January 2006 to January 2009, the rate of construction of single-family homes has remained essentially unchanged for the past two months, although (thankfully) it is at a level where builders are still rapidly cutting into excess inventories. In all likelihood, a bottom has been reached for both home sales and housing starts.

      On the trade front, companies are increasingly willing to do business across borders. Inbound and outbound container traffic is up, at both the port of Los Angeles and the port of Long Beach. This is also a signal that credit conditions are easing, as international trade tends to be more credit-sensitive than domestic commerce.

      Other signs of a rebound in monetary velocity can be found in prices. Consumer prices fell at a 12.4% annual rate in the last three months of 2008, the fastest decline since the Great Depression. In the first three months of 2009, however, prices are up at a 2.2% annual rate.
      The Recession Is Over -
      "Every man has his weakness. Mine was always just cigarettes."


      • #4
        CARPE DIEM: Is the Recession Over?

        Is the Recession Over?

        NY TIMES -- Is the recession over? Finally, the answer appears to be yes. But before anyone gets too excited, a dose of reality. The difference between recession and recovery may be little more than a statistical technicality. The economy may not be falling, but neither is it rising very quickly.

        The outlook is for more of the same: slow, perhaps even glacial, improvement. Unemployment may continue to rise for three to six months, perhaps longer. And there is always the possibility that the recovery will abort.

        Still, moving up beats moving down. There is light, if only dim, at the end of the economic tunnel. The U.S. economy has been wallowing in recession for more than a year and a half and stagnating for about three years. Output hasn't fallen very much -- the drop has been only half the size of recent recessions. It has sent millions of Americans onto the jobless rolls.

        Not everything is rosy. Robert Gordon, an economics professor at Northwestern University and a member of the committee that determines the stop and start dates of recessions for the National Bureau of Economic Research, says one-third of the economy will continue to stagnate. Commercial real estate is dead; until vacant office space is filled, there won't be new construction. And the defense industry is headed down, fast. Even exports -- which have been the main source of new jobs during the last few years -- will probably slow because the Japanese and German economies are running into trouble.

        The best guess is that unemployment will stay steady or edge a bit higher because companies are unlikely to make permanent hires until they're convinced recovery is for real. When might that be? Perhaps early fall.
        MP: This was published in the New York Times on Sunday, March 22, 1992, which was actually one full year after the recession actually ended, but a full nine months before the NBER made its official announcement on December 22, 1992 that the 1990-1991 recession ended in March 1991.

        Bottom Line: It takes almost two years after a recession ends before the NBER makes its final determination of a "trough" (21 months after the 1990-1991 recession, and 20 months after the March-November 2001 recession), and even a year after a recession ends, many in the media (see NY Times above: "There is always the possibility that the recovery will abort.") are not yet convinced of an economic recovery, and are still spreading suspicion, uncertainty and reservations about the expansion.
        "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3


        • #5
          The recession is over (15 months ago)

          Business Cycle Dating Committee, National Bureau of Economic Research

          CAMBRIDGE September 20, 2010 - The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. 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.

          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. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. 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.

          The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date.

          The committee waited to make its decision until revisions in the National Income and Product Accounts, released on July 30 and August 27, 2010, clarified the 2009 time path of the two broadest measures of economic activity, real Gross Domestic Product (real GDP) and real Gross Domestic Income (real GDI). The committee noted that in the most recent data, for the second quarter of 2010, the average of real GDP and real GDI was 3.1 percent above its low in the second quarter of 2009 but remained 1.3 percent below the previous peak which was reached in the fourth quarter of 2007.

          Identifying the date of the trough involved weighing the behavior of various indicators of economic activity. The estimates of real GDP and GDI issued by the Bureau of Economic Analysis of the U.S. Department of Commerce are only available quarterly. Further, macroeconomic indicators are subject to substantial revisions and measurement error. For these reasons, the committee refers to a variety of monthly indicators to choose the months of peaks and troughs. It places particular emphasis on measures that refer to the total economy rather than to particular sectors. These include a measure of monthly GDP that has been developed by the private forecasting firm Macroeconomic Advisers, measures of monthly GDP and GDI that have been developed by two members of the committee in independent research (James Stock and Mark Watson, (available here), real personal income excluding transfers, the payroll and household measures of total employment, and aggregate hours of work in the total economy. The committee places less emphasis on monthly data series for industrial production and manufacturing-trade sales, because these refer to particular sectors of the economy. Movements in these series can provide useful additional information when the broader measures are ambiguous about the date of the monthly peak or trough. There is no fixed rule about what weights the committee assigns to the various indicators, or about what other measures contribute information to the process.

          The committee concluded that the behavior of the quarterly series for real GDP and GDI indicates that the trough occurred in mid-2009. Real GDP reached its low point in the second quarter of 2009, while the value of real GDI was essentially identical in the second and third quarters of 2009. The average of real GDP and real GDI reached its low point in the second quarter of 2009. The committee concluded that strong growth in both real GDP and real GDI in the fourth quarter of 2009 ruled out the possibility that the trough occurred later than the third quarter.

          The committee designated June as the month of the trough based on several monthly indicators. The trough dates for these indicators are:

          Macroeconomic Advisers’ monthly GDP (June)
          The Stock-Watson index of monthly GDP (June)
          Their index of monthly GDI (July)
          An average of their two indexes of monthly GDP and GDI (June)
          Real manufacturing and trade sales (June)
          Index of Industrial Production (June)
          Real personal income less transfers (October)
          Aggregate hours of work in the total economy (October)
          Payroll survey employment (December)
          Household survey employment (December)

          The committee concluded that the choice of June 2009 as the trough month for economic activity was consistent with the later trough months in the labor-market indicators—aggregate hours and employment—for two reasons. First, the strong growth of quarterly real GDP and real GDI in the fourth quarter was inconsistent with designating any month in the fourth quarter as the trough month. The committee believes that these quarterly measures of the real volume of output across the entire economy are the most reliable measures of economic activity. Second, in previous business cycles, aggregate hours and employment have frequently reached their troughs later than the NBER’s trough date. In particular, in 2001-03, the trough in payroll employment occurred 21 months after the NBER trough date. In 2009, the NBER trough date is 6 months before the trough in payroll employment. In both the 2001-03 and 2009 cycles, household employment also reached its trough later than the NBER trough date.

          The committee noted the contrast between the June trough date for the majority of the monthly indicators and the October trough date for real personal income less transfers. There were two reasons for selecting the earlier date. The first was described above -- the fact that quarterly real GDP and GDI rose strongly in the fourth quarter. The second was that real GDI is a more comprehensive measure of income than real personal income less transfers, as it includes additional sources of income such as undistributed corporate profits. The committee’s use of income-side measures, notably real GDI, is based on the accounting principle that the value of output equals the sum of the incomes that arise from producing the output. Apart from a random statistical discrepancy, real GDI satisfies that equality while real personal income does not.

          The committee also maintains a quarterly chronology of business cycle peak and trough dates. The committee determined that the trough occurred in the second quarter of 2009, when the average of quarterly real GDP and GDI reached its low point.

          For more information, see the FAQs and the more detailed description of the NBER's business cycle dating procedure at The NBER's Business Cycle Dating Committee. An Excel spreadsheet containing the data and the figures for the indicators of economic activity considered by the committee is available at that page as well.

          The current members of the Business Cycle Dating Committee are: Robert Hall, Stanford University (chair); Martin Feldstein, Harvard University; Jeffrey Frankel, Harvard University; Robert Gordon, Northwestern University; James Poterba, MIT and NBER President; James Stock, Harvard University; and Mark Watson, Princeton University. David Romer, University of California, Berkeley, is on leave from the committee and did not participate in its deliberations.
          "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3