This morning the Bureau of Economic Analysis released its first estimate for 2011 GDP. It showed national output for the first time surpassing the pre-recession peak, which occurred in the last quarter of 2007. (See chart below) The expansion in 2011 was led by autos, computers, and other manufactured goods.
Given that the economy hit its trough in mid-2009, the long slow climb since then has been disappointing. The outcome turns out to have been worse than the conventional wisdom that sharp declines tend to be followed by sharp recoveries. On the other hand, the outcome turns out to have been somewhat better than the Reinhart-Rogoff thesis that when the cause of a recession is a financial crisis, the recovery tends to take many years.
The recession is over. The last piece has fallen into place, with the BLSannouncement that employment rose in March.
Identifying the beginnings and ends of recessions has been difficult in recent decades because the two most important indicators, output and employment, have sometimes behaved differently from each other. Most notoriously, in the recovery that began in November 2001, employment lagged far behind economic growth. If one had gone by the labor market, one might have called it a three year recession. But if one had gone by GDP, one might have wondered whether there was a recession at all.
Is the United States in recession?If one looked solely at the adverse shocks that have hit the economy over the last year, one would infer an unusually high probability of a recession.If one consulted some of the most import economic measures over the last year, one would say the country clearly entered a recession last January.If one gauged the popular mood, one would hear, “Of course we are in recession !”
The one criterion that has been missing is the one criterion that people most commonly have in their minds as the definition of a recession:two consecutive quarters of negative growth.This morning, October 30, the Commerce Department released the advance estimate of GDP for the 3rd quarter.It showed a decline. The decline was small: just 0.3 per cent at an annual rate; and it is only one quarter, not yet two. But at this point there can be little doubt that we are really truly in recession.