People wait in line at a job fair sponsored in November, 2009 in New York City.Spencer Platt/Getty Images
Newsflash: the recession isn't over.
More than 2 1/2 years after the worst recession since the Great Depression began, the official arbiter of U.S. business cycles still isn't prepared to declare the slump over.
Blame it on the sluggish recovery, the sheer steepness of the slide and unusually large recent revisions from the U.S. Census Bureau of just how fast - or slow - the economy is growing. But the eight members of the U.S. National Bureau of Economic Research's recession dating committee are stubbornly refusing to give the all-clear sign.
And the longer the wait, the more people fret about whether the world's largest economy is truly and firmly on the road to recovery.
The NBER insists there's nothing particularly unusual about the long lag time. Donna Zerwitz, the non-profit organization's director of public information, pointed out that the NBER waited 1 1/2 years to declare the last two recessions over.
If outside economists are right, and the recession ended sometime last summer or late spring, the NBER is still ahead of schedule.
Amid grumbling from some members, the committee issued a statement in April acknowledging that "most indicators" have turned positive, but it insisted an official declaration remained "premature." The statement noted that key data is still being revised by the government.
Ms. Zerwitz was vague about when the committee plans to meet again. "There could be a meeting, but there's nothing on the calendar," she said.
Panel members talk to each other informally all the time as key new bits of information become available, such as last Friday's dismal jobs report - the second month in a row that the economy shed jobs, according to Ms. Zerwitz.
"There's so much going on in the economy," she added.
Committee chairman Robert Hall, an economics professor at Stanford University in Palo Alto, Calif., declined to comment, saying the committee's "policy is to make information of this type available only on the NBER website."
Part of the problem is that the NBER's declarations are partly subjective, and based on a lot more than just economic growth. Gross domestic product turned positive in the third quarter of last year after four straight negative quarters.
The NBER has no fixed rule on when recessions begin an end, such as the conventional definition of a recession as two consecutive quarters of declining GDP. In addition to GDP - the broadest measure of economic growth - the committee also looks at employment, incomes, retail sales and industrial production.
Even GDP is proving tough to pin down. The U.S. Census bureau issues three sets of GDP figures - a preliminary estimate, followed by two revisions. And those revisions have been unusually large in the past year as the agency struggles to cope with the historic scale of this slump. Some economists worry that the second quarter number - 2.4 per cent annual growth - could be cut in half when the next revision comes out Aug. 27.
David Rosenberg, chief economist and strategist at Gluskin Sheff in Toronto, said the NBER has good reason to be so cautious this time around. This isn't your garden variety slump, he pointed out in a report Wednesday.
"If this was a normal recession followed by a normal recovery … real GDP would already be back at a new high," he said. "But here are, 31 months after the recession began, and the level of GDP is still 1.1 percentage points below its prior high."
Mr. Rosenberg said the United States suffered crushing blows to both personal incomes and employment, and that's holding back the recovery. He pointed out that personal incomes tumbled in 49 of the 52 largest cities in the U.S. last year, in spite of the stock market rebound.
He also highlighted the employment rate (as opposed to the unemployment rate), which has fallen for the past three months. He said the current employment rate, at 58.4 per cent, is nearly six percentage-points below its pre-recession peak, leaving the United States 12-million shy of full employment.
One solution to the recession-dating conundrum may be to scrap the committee altogether and replace it with a series of complex algorithms. That's the conclusion of an NBER-sponsored working paper by University of California economist James Hamilton, released Wednesday on the organization's Website. Mr. Hamilton concluded that processing data in real time would produce findings that are more timely, "purely objective" and unburdened by political pressures.
______
MEASURING A RECESSION
Traditional:
Two consecutive quarters of negative economic growth.
NBER (U.S.):
"A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade … The [NBER]gives relatively little weight to real GDP because it is only measured quarterly and it is subject to continuing, large revisions."
Past four U.S. recessions and their durations
December, 2007 to ?
March, 2001 to November, 2001 - 8 months
July, 1990 to March, 1991 - 8 months
July, 1981 to November, 1982 - 16 months
Source: Staff, National Bureau of Economic Research