Recession is a technical term that technically doesn’t apply to what the U.S. is currently going through. Economic misery as a real-life condition persists, but a government panel announced Monday that the recession officially ended in June 2009. The economic downturn started in December 2007 and lasted for 18 months — the longest slide since World War II. The economy’s prolonged freefall had earned it the title of “Great Recession” long before it was officially declared over. The panel said that even though the economy resumed growth, it is far from returning to normal capacity. Meanwhile, the Federal Reserve is seeking to avoid a “growth recession” in which economic expansion is too slow to stem rising unemployment.
Recession runner up to Depression
The longest recession since the Great Depression ended when the economy resumed growth last summer, according to the National Bureau of Economic Research. The Los Angeles Times reports that a relapse, or double-dip, would be a new recession. The 18-month Great Recession is the official runner up to the 43-month Great Depression that lasted from 1929 to 1933. The most recent economic collapse eclipsed 16-month recessions in 1973-75 and 1981-82. More than 8 million people lost their jobs, and the labor market could take years to recover. The NBER said the most damaging factor in this recession was rapid productivity growth, which deleted jobs as output was marginally sustained.
Recession ended on paper, but not on the street
The NBER warned last spring that what appears to be an expansion could be a blip in a long-term contraction. The Washington Post reports that the NEBR defines a recession as “a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production, and wholesale-retail sales.” According to the panel, GDP and industrial production bottomed out in June 2009. Employment, however, did not begin expanding until December 2009. The NEBR said that by declaring a specific date for the end of the recession it was not saying that economic conditions have been favorable since then.
Anatomy of a growth recession
While the economy is expanding, it has been too weak to lower the unemployment rate; this is called a growth recession. Bloomberg reports that economic growth slowed in 2010 to a 1.6 percent annual rate in the second quarter from 3.7 percent in the first quarter. A 5 percent rate of growth in the fourth quarter of 2009 raised hopes that economic recovery was gathering steam. An unemployment rate stuck at 9.5 percent and above is stifling the consumer spending the economy needs to grow. Fed chairman Ben Bernake said the agency has the tools to aid the economy. With interest rates near zero, some think the next step for the Fed is to buy more Treasuries, or government debt. Others believe severe unemployment is the result of Americans lacking the skills to fill available jobs — a problem monetary policies can’t fix.