WASHINGTON, Sept 20, 2010 (AFP)
The US economy exited recession in June 2009, the National Bureau of Economic Research said Monday, officially calling the end to the longest downturn in more than half a century.
More than eight million jobs were lost in the slump that was triggered by dodgy Wall Street mortgage investments.
President Barack Obama said the end of the “Great Recession” would come as little solace to the millions of people who are still out of work
“Even though economists may say that the recession officially ended last year, obviously for the millions of people who are still out of work, people who have seen their home values decline, people who are struggling to pay the bills day to day, it’s still very real for them.”
The NBER, a non-profit research group recognized as the arbiter of US economic cycles, underscored that slow pace of recovery, as it issued a statement confirming “the recession lasted 18 months, which makes it the longest of any recession since World War II.”
“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,” it said.
At the same time panel members warned economic activity could remain below normal well into the expansion.
Earlier on Monday, the Organization for Economic Cooperation and Development (OECD) said the US economy would grow at a slower-than-expected rate of 1.5 percent this year.
The Paris-based OECD said US growth would be far less than the 3.2 percent predicted in May and would increase to only 2.3 percent next year raising the specter of a painfully slow recovery.
“The United States is slowly recovering from a severe recession… with economic growth projected to remain low for some time,” the OECD said.
The body added that “unemployment is likely to stay elevated for a relatively long period.”
“Continuation of targeted support for the labor market may also be necessary until private sector employment picks up more strongly.”
The NBER announcement was widely expected by economists.
“What matters now is how long the recovery will take,” according to Augustine Faucher of Moody’s Economy.com. “The odds of a second recession are too high for comfort.”
Despite economists’ warnings of a double-dip recession, the panel said the economy had already recovered enough that any new slide would be an entirely new recession.
“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.”
Unlike many countries where a recession is defined as two consecutive quarters of shrinking growth domestic product, in the United States it is determined by a seven-member NBER panel.
Although the depth of the crisis had already been clear, the NBER confirmed it was longer than those which began in 1973 and 1981 and which both lasted 16 months.
The NBER announcement gave a boost to US stock markets with the blue chip Dow Jones Industrial Average surging over 145 points, or around 1.4 percent.
Sept. 20, 2010, 3:08 p.m. EDT
U.S. recession ended June 2009, NBER finds
Downturn of 18 months ranks as longest since Great Depression
By Jeffry Bartash and Ruth Mantell, MarketWatch
WASHINGTON (MarketWatch) — The U.S. recession that began in December 2007 ended in June 2009, making the 18-month slump the longest since the Great Depression, according to the National Bureau of Economic Research.
Yet the NBER also cautioned that its findings bear no relation to the current state of the economy and do not represent a forecast about the future. If another downturn occurs anytime soon, the NBER said, it would constitute a separate recession. See NBER statement.
The NBER, founded in 1920, is a nonprofit group entrusted by the government with determining when recessions begin and end. The Cambridge, Ma.-based group includes leading economists in business, academia and trade unions.
The group said the economy bottomed out in June 2009, followed by a slow expansion. Previously, the longest recessions in the modern era lasted 16 months — one in 1973-75 and another in 1981-82.
James Poterba, president of the NBER, said a plunge in household wealth, as well as financial crises in the U.S. and overseas, contributed to the long duration of the recession.
“It’s the combination of financial shocks that hit the economy,” he said.
The NBER’s findings were not greeted with any fanfare. Although the U.S. economy expanded at a sharp 5.0% pace in the final three months of 2009, growth in gross domestic product slowed to 3.7% in the first quarter and 1.6% in the second quarter — renewing concerns about whether another downturn is in the cards.
The nation’s unemployment rate of 9.6%, meanwhile, remains stuck near a 27-high. And more than 16% of working-age Americans lack a good job when the data include people who have given up looking for work or who can only find a part-time position.
Why Are Women Leaving Wall Street?
Kelsey Hubbard talks with Kyle Stock, senior reporter at FINS, about research that shows such a trend.
“For the typical American family, the economy is still stagnant,” said economist Lawrence Katz of Harvard. “There is very little sign of widespread prosperity.”
President Obama acknowledged the weak economy during an event Monday to address the concerns of voters.
“Even though economists may say that the recession officially ended last year, for the millions of people who are still out of work, people who’ve seen their home values decline, people who are struggling to pay the bills day to day, it’s still very real for them,” he said at a CNBC forum in Washington, D.C.
Most economists doubt the U.S. will sink into another recession, but few expect growth to accelerate sharply again absent a big increase in hiring or consumer spending. Worried about the future, many Americans have cut spending to reduce their debt or increased their savings.
Businesses have also turned cautious: The Federal Reserve reported on Friday that large U.S. companies continue to maintain a record $1.84 trillion stockpile of cash or other liquid investments. Lackluster business investment has been another drag on the economy. See related story on cash holdings and changes in families’ net worth.
The NBER alluded to the current economic weakness in its declaration.
“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,” the firm said. “Rather, the committee determined only that the recession ended and a recovery began in that month.”
The slow pace of growth and the nation’s high jobless rate have become the dominant issues in Washington as the November elections approach.
At the CNBC forum Monday, Obama pointed out that the economy was already in bad shape when he took office. He insisted his policies – massive federal stimulus, auto-company bailouts and more vigilant oversight of Wall Street – are helping the economy to mend.
Yet Republicans, eyeing a chance to recapture Congress, blame Obama. They say his policies have sowed uncertainty and raised the cost of doing business, deterring companies from hiring.
“The glacial pace of private-sector job creation is a function of many factors, including irresponsible economic policies imposed by Washington,” Rep. Eric Cantor, a top Republican from Ohio, wrote in The Wall Street Journal Monday.