The NBER Catches Up With Main St Finally

Apparently the NBER has caught up with the rest of the country and finally noticed that we’re in a recession:

(From the WSJ ):

NEW YORK — The U.S. economy has been in recession for about a year, according to the research organization that tracks economic cycles.

In a statement, the National Bureau of Economic Research said its Business Cycle Dating Committee determined that the U.S. entered recession in December 2007, marking the end of the economic expansion that began in November 2001. That month marked the end of the last recession for the U.S. economy.

“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income and other indicators,” according to the NBER’s statement.

The committee uses gross domestic product reports and gross domestic income estimates as a guide. Domestic production and employment are the primary conceptual measures of economic activity, according to the statement.

The determination was made Friday and released to the public Monday. (Read the statement.) The NBER noted it has tweaked cycle dates in the past, although no changes have occurred since 1978.

Outside of people who were ignoring the obvious and behaving as if the economy was strong, this official pronouncement of a recession is relatively inconsequential as the NBER has merely validated what households, businesses, investors, et al have been feeling for well over a year.

At this point whether or not we’re in an official recession is irrelevant, all that matter is how we (as business owners, entrepreneurs, investors and every day citizens) react to the economic conditions around us, in addition to the solutions implemented by the folks at the controls of the economy.

Still when you consider the fact that organizations like the NBER are usually behind the eight ball in that they’re merely identifying what’s already happened, as opposed to providing insights into the present, you almost have to wonder if the worse has already passed.

My suspicion is that the economy will continue to worse for 2-3 more quarters as the economic conditions of the present are a result of the economic weakness of the past, beyond that I think the economy will begin to improve (albeit very slowly) as (again) we will still be paying for the mistakes, misinformed solutions and economic weakness of ‘08 and ‘07.

Source:

The WSJ: “U.S. Entered a Recession A Year Ago, NBER Says” — Rob Curran, December 1, 2008.

Disclosure: at the time of publishing the author didn’t own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn’t be viewed as financial or investment advice.

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