Has the Recession Really Come to an End?

In late September, the National Bureau of Economic Research (NBER) announced the end of the most difficult recession since the Great Depression had come to an end in June 2009–over a year prior to the announcement. Many find this hard to believe because at the time, thousands were still losing jobs and homes were being foreclosed upon in record numbers every week.

Even now, we’re still in the midst of a difficult time and are still seeing job losses and record foreclosures. This makes many of us wonder if, despite what NBER says, the recession is really over.

The NBER Declared the End of the Recession

The NBER, which is an independent group of economists, released a statement in September declaring that the recession officially ended 18 months after it began in Dec. 2007. While this was the longest-running and deepest recession since the Great Depression, many don’t believe it actually ended when the group says it did because times are still difficult across the globe.

So what made the group decide the recession ended in the summer of 2009?

According to them, it was over by definition. In other words, they weren’t saying the economy was in much better shape, but June was when the economy hit bottom.

This means despite ongoing job loss and foreclosures, the economy is no longer in the midst of a financial meltdown and has begun growing very slowly. We’re not likely to see a double dip recession as some have feared. In fact, if there was another drop in the economy, it would be the start of a new recession, not a continuation of the one that is now said to be over.

What Determines a Recession’s End?

The NBER’s declaration of the recession’s end has brought about an issue that has confused people for many decades. A recession is defined as a significant decline in activity, spread across the economy that lasts more than a few months. So what factors determine when it has come to an end? Usually, the following must have been negatively affected for an extended period of time before beginning to see an improvement:

• Industrial production
• Employment
• Real income
• Wholesale retail trade

Overall, the nature of business cycles determines whether the economy is in the midst of a recession or expansion. When business cycles increase from the bottom of the trough–or the economy stops receding and begins to expand again–it has come to an end.

This is why a recession’s end doesn’t necessarily look better to the person living during the transition. We tend to think of the end of the recession being a time when things looked the way they did before its onset. In actuality, the recession’s end occurs when the economy has reached its worst point and has started to improve.

When Will the Economy Actually Improve?

Despite the fact that the recession is over, there is no doubt we’re still experiencing difficult times. This is because a recession’s impact lingers for months–and sometimes years–after its end has been declared.

In the case of what we have come to know as the Great Recession, well over a year after its end, we have seen continued trauma nationally and worldwide, thanks to what became a global recession.

Foreclosures are still reaching record numbers, employers are still letting their workers go resulting in a steady unemployment rate of 9.6 percent and some say the housing market will never fully recover.

Economists have predicted we may see improvements around 2012. At this point, they think housing prices will begin to rebound, foreclosures should taper off and companies should begin to hire again. However, some believe we won’t see improvements until 2014.

So to answer the question of whether the recession has actually come to an end, according to the NBER, it has. When we will see tangible improvements in the job and housing markets is something that we probably won’t know for months or even years to come.