Rejoice! The Recession is Over!

[J]

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Bernanke says recession 'very likely over'

Bernanke says recession 'very likely over,' confident Congress will pass new financial rules
By Jeannine Aversa, AP Economics Writer
On Tuesday September 15, 2009, 1:21 pm EDT


WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke said Tuesday the worst recession since the 1930s is probably over, although he cautioned that pain -- especially for the nearly 15 million unemployed Americans -- will persist.

Bernanke said the economy likely is growing now, but he warned that won't be sufficient to prevent the unemployment rate, now at a 26-year high of 9.7 percent, from rising.

"From a technical perspective, the recession is very likely over at this point," Bernanke said in responding to questions at the Brookings Institution. "It's still going to feel like a very weak economy for some time because many people will still find that their job security and their employment status is not what they wish it was."

The recession, which started in December 2007, has claimed a net total of 6.9 million jobs.

With expectations for a lethargic recovery, the Fed predicts that unemployment will top 10 percent this year. The post-World War II high was 10.8 percent at the end of 1982.

Some economists say it will take at least four years for the jobless rate to drop down to a more normal range of 5 percent.

Even if the economy logs "moderate" growth in 2010, unemployment is likely to stay elevated, Bernanke suggested.

"Unfortunately, unemployment will be slow to come down. It will come down but it may take some time," he said. "Obviously, that's a very serious concern."

Drugmaker Eli Lilly & Co. said Monday that it will cut 5,500 jobs over the next two years, 14 percent of its work force, as it restructures the company into five units.

Still, Bernanke's declaration that the recession likely ended marked his most optimistic assessment yet of the economy.

Last month, Bernanke told a Fed conference in Wyoming that economic activity appears to be "leveling out" after declining sharply at the end of last year and into the beginning of this year. He also said that the global economy was just "beginning to emerge" from recession.

Bernanke's speech to at Brookings was identical to the one he delivered at the Fed conference.

Analysts predict the U.S. economy is growing in the current quarter, which ends Sept. 30, at an annual rate of 3 to 4 percent. It shrank at a 1 percent pace in the second quarter, much slower than in previous quarters.

Bernanke said the economy is coping with "ongoing headwinds," including hard-to-get-credit for consumers and businesses, and households saving more, spending less and trimming their debt. Those forces can weigh down the recovery, he said.

Other analysts worry that falling house prices could hamper the broader rebound, especially if they cause consumers to tighten their belts.

While many on Wall Street have been encouraged by early signs of stabilization in U.S. home prices and hope the housing market may have hit bottom, others aren't so sure.

Deutsche Bank analyst Karen Weaver on Tuesday predicted that national home prices won't stop sliding until next summer and likely will fall another 10.5 percent from this summer's levels. Bigger declines are expected in cites like New York, Salt Lake City, Fort Lauderdale, Fla., and Baltimore.

The Fed boss also said he is confident that Congress will enact a revamp of the nation's financial rule book to prevent a future crisis from happening.

"I feel quite confident that a comprehensive reform will be forthcoming," Bernanke said.

President Barack Obama on Monday urged Congress to enact legislation this year.

"This has just been too big a calamity and too serious a problem" over the past year, with the near meltdown of the U.S. financial system, for Congress not to take action, Bernanke added.

He spoke one year after Lehman Brothers filed for bankruptcy, the largest in U.S. history. It's collapse roiled financial markets worldwide, nearly halted the flow of credit and almost brought down the entire U.S. financial system.

AP Real Estate Writer Alan Zibel contributed to this report.

Clearly my predictions and analysis of the economy and markets were completely mistaken. There won't be a depression, the worst is over, and now we begin a recovery where jobs continue to be lost, credit continues to tighten, consumer spending (which is 70% of the US economy) continues to drop, road, railway, and other shipping reaches new lows every month, and the government keeps running record deficits amid cratering tax revenues. (wait a minute, that's a recovery?)

On the other hand, now might be a good time to draw parallels to Herbert Hoover:

"Gentleman, you have come sixty days too late. The depression is over."
- Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

I suspect future historians will see today's announcement by Bernanke in the same light.

[KrauserKrauser]

If only Timmy could have held up a "Mission Accomplished" sign, then the moment could have been perfect.

Whatever happens, I'm Goldmann Sachs will weather the storm "somehow".

[Guardsman Bass]

Whatever happens, I'm Goldmann Sachs will weather the storm "somehow".

It definitely helps when you somehow become the Brain Trust for all the major Treasury appointments.

There won't be a depression, the worst is over, and now we begin a recovery where jobs continue to be lost, credit continues to tighten, consumer spending (which is 70% of the US economy) continues to drop, road, railway, and other shipping reaches new lows every month, and the government keeps running record deficits amid cratering tax revenues. (wait a minute, that's a recovery?)

We'll have to wait and see if it's like 2000-2007. Job growth eventually did return after 2003, but it was pretty anemic overall - and after 2007 it started going downhill again.

[Surlethe]

Clearly my predictions and analysis of the economy and markets were completely mistaken. There won't be a depression, the worst is over, and now we begin a recovery where jobs continue to be lost, credit continues to tighten, consumer spending (which is 70% of the US economy) continues to drop, road, railway, and other shipping reaches new lows every month, and the government keeps running record deficits amid cratering tax revenues. (wait a minute, that's a recovery?)

Yes, if the economy logs nonnegative aggregate growth, you will be wrong. Note that Bernanke's saying, "from a technical perspective."

I mean, think about the Great Depression. Even though the recession only lasted until 1933 (and another one from 37-38), we consider the Depression to span the entire decade.

[Duckie]

clearly when the recession ends the economy automatically fixes itself, right guys? recession means 'bad economy', it's not a term with an actual definition or even simply defineable as "economy is getting shittier".

Code: Select all

\ RECESSION

         \                DEPRESSION              /
                   ______________

[aerius]

Don't forget his testimony before Congress where he famously stated that "subprime is contained".

Seriously, why would anyone believe this assclown? Duh, there is no housing bubble. Housing will not go down. Subprime is contained. There will be no spillover into the economy. And now he says the recession is "technically over", and throws in a dozen qualifiers & weasel words. I might as well be listening to Baghdad Bob or Jim Cramer.

[Gerald Tarrant]

clearly when the recession ends the economy automatically fixes itself, right guys? recession means 'bad economy', it's not a term with an actual definition or even simply defineable as "economy is getting shittier".

Code: Select all

\ RECESSION

         \                DEPRESSION              /
                   ______________

The definition that's the most widely agreed upon in the US is the NBER's which is: two consecutive quarters of negative growth. The problem with that definition is it seems now to do a poor job of encapsulating how poorly things are going for the average worker. During the post 9/11 recovery economists started using the term "jobless recovery" to describe GDP growth without employment growth.

Additionally saying the "recession has ended" is not the same as saying "we're recovering". The economy staying flat is technically no longer a recession, but it's nothing to cheer about either. Nouriel Roubini has been suggesting that we'll be in a "U-shaped" recession, Dr Doom Strikes Again.

Part of the problem with the OP's article is that Bernanke is almost certainly using the old definition of at least 2-consecutive quarters of GDP contraction, technically such a recession would end if GDP stopped falling, even if it never grew again. ([Reducto-ad Absurdia] A Nuclear war that wipes out humanity would be a recession, but the post-war zero-GDP era wouldn't; since GDP is no longer contracting[/R.ad Abusrdia]) I know that New-Keynesians have their own economic barometers, you'll note in the Roubini article he refers to potential economic growth. I believe that leads to the preferred New-Keynesian recession definition: economic performance below potential (potential is probably based off long-term growth trends, i.e. the US has managed to average something like 3% annual growth rate). It may very well be time for economists to ditch the old definition, as it doesn't seem very pertinent to current events. There were already starting to be questions about it's applicability after the last recovery, this new recession may end up tossing it into the dustbin.

[J]

The definition that's the most widely agreed upon in the US is the NBER's which is: two consecutive quarters of negative growth. The problem with that definition is it seems now to do a poor job of encapsulating how poorly things are going for the average worker. During the post 9/11 recovery economists started using the term "jobless recovery" to describe GDP growth without employment growth.

That's the generally known version, the NBER does take other factors into account when declaring a recession. The post 9/11 recession isn't one by the two consecutive quarters of negative growth standard, the current recession which was declared to start in fall 2007 didn't have two consecutive negative quarters until a year later.

Part of the problem with the OP's article is that Bernanke is almost certainly using the old definition of at least 2-consecutive quarters of GDP contraction, technically such a recession would end if GDP stopped falling, even if it never grew again. ([Reducto-ad Absurdia] A Nuclear war that wipes out humanity would be a recession, but the post-war zero-GDP era wouldn't; since GDP is no longer contracting[/R.ad Abusrdia]) I know that New-Keynesians have their own economic barometers, you'll note in the Roubini article he refers to potential economic growth. I believe that leads to the preferred New-Keynesian recession definition: economic performance below potential (potential is probably based off long-term growth trends, i.e. the US has managed to average something like 3% annual growth rate). It may very well be time for economists to ditch the old definition, as it doesn't seem very pertinent to current events. There were already starting to be questions about it's applicability after the last recovery, this new recession may end up tossing it into the dustbin.

No doubt. It's mis-leading at best and to be honest I think he's deliberately lying to us all. Personally my thoughts are along the lines of "the recession will soon be over. Welcome to the depression". I'm looking at container shipping and port traffic right now and it points to a Christmas shopping season which will be much worse than last year's. If shipping doesn't pick up soon we're looking at a good 15-20% drop. That will destroy the retail & commercial real estate, setting off another round of busted banks & bailouts.

[J]

National Association of Business Economics says recession is over.

Reuters link

U.S. recession over, unemployment seen at 10 percent
Saturday, 10 Oct 2009 09:27am EDT By Lucia Mutikani

WASHINGTON (Reuters) - The worst U.S. recession since the Great Depression has ended, but weak household spending as the labor market struggles to create jobs will slow the pace of the economy's recovery, according to a survey released on Monday.

The survey of 44 professional forecasters released by the National Association for Business Economics, also known as the NABE, found that 80 percent of the respondents believed the economy was growing again after four straight quarters of declines.

"The great recession is over," NABE President-Elect Lynn Reaser said.

"The vast majority of business economists believe that the recession has ended, but that the economic recovery is likely to be more moderate than those typically experienced following steep declines."

Recessions in the United States are dated by the National Bureau of Economic Research. The private-sector group, which does not define a recession as two consecutive quarters of decline in real gross domestic product, often takes months to make determinations.

The recession that started in December 2007 is the longest and deepest since the 1930s. It was triggered by the U.S. housing market's collapse and the ensuing global credit crisis.

While the economy is believed to have rebounded in the third quarter, analysts believe that ordinary Americans will probably not see much difference as unemployment will remain high well into 2010, restraining consumption.

"We don't necessarily expect the U.S. economy to fall into a double-dip recession. This time round, consumers will be reluctant to join the party," said Paul Ashworth, senior U.S. economist at Capital Economics in Toronto.

The NABE survey, conducted in September, predicted real GDP growth expanding at an annual pace of 2.9 percent over the second half of this year. Output for all of 2009 is expected to contract 2.5 percent and next year, rebound 2.6 percent.

Much of the anticipated recovery was seen driven by businesses rebuilding their inventories after aggressively reducing unwanted stockpiles of unsold goods to match weak demand.

HOUSING PRICES TO HIT BOTTOM

Investment in the residential market would also add to growth, with the majority of the survey's respondents convinced that the housing market downturn, which has lasted more than three years, was close to coming to an end.

About two-thirds of respondents believed house prices will reach a bottom this year. The survey found that high house prices would not pose a threat to the sector's recovery.

The survey predicted that the unemployment rate will rise to 10 percent in the first quarter of 2010 and edge down to 9.5 percent by the end of that year. The labor market was not expected to regain most of the jobs destroyed in the recession until 2012 or beyond.

The weak labor market will continue to weigh on consumer spending, slowing the recovery. The jobless rate climbed to 9.8 percent in September -- a 26-year high -- from August's 9.7 percent.

Labor market slack, combined with weak wage growth, meant inflation would not be an obstacle to the economic recovery and the Federal Reserve will not be under pressure to raise interest rates, the survey found.

"With improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation," Reaser said.

The U.S. central bank was seen leaving its overnight benchmark lending rate near zero until late next spring, followed by measured increases that would take the rate to 1 percent by the end of 2010, the survey showed.

Despite signs of improvement in the financial markets, most respondents believed that it would take some time for them to return to normal. Only 29 percent believed this would happen in the second half of next year.

Respondents also expected the U.S. dollar to weaken further this year and into 2010, but did not see this contributing to a narrowing of the country's trade deficit as the economic revival stimulates demand for imports.

The dollar has lost about 5.8 percent of its value against a basket of currencies so far this year, largely because of worries over the government's growing budget deficit and expectations that the Fed will keep interest rates at super-low levels for a while.

(Editing by Jan Paschal)

Of course there's a slight problem. This is their prediction from two years ago.

http://www.reuters.com/article/economic ... 1520071119

U.S. economic growth seen moderate in 2008 - NABE
Mon Nov 19, 2007

WASHINGTON, Nov 19 (Reuters) - The risks of a U.S. economic recession have risen in recent months but the economy looks poised for moderate growth next year, according to a survey of economists released on Monday.

"While the economy faces a higher risk of recession from credit markets, housing and energy prices, NABE's panelists still do not see recession as the mostly likely outcome," said Ellen Hughes-Cromwick, president of the National Association for Business Economics and Ford Motor Co's (F.N) chief economist.

About three-fifths of the panelists put the odds of recession starting over the next year at less than one-third, with about one-in-five seeing the risk at over 50 percent.

"Spillovers from housing weakness to broader consumer spending, along with credit-market tightening, are seen as recession triggers," the survey said.

In 2008, the economy is expected to grow by a moderate 2.6 percent, according to the survey of 50 economists polled between Oct. 22 and Nov. 6 by the NABE. The group's prior quarterly forecast was for 2.8 percent growth next year.

For this year, however, the group raised its forecast to 2.4 percent growth, as measured by real gross domestic product, from 2.2 percent growth earlier. That was after the government put GDP at a 3.9 percent annual rate in July-September, up from 3.8 percent in the second quarter.

Slower growth near term will limit the rise in core personal consumption expenditures, a government measure of inflation that excludes erratic food and energy prices, to 1.9 percent in 2008, down from a 2 percent estimate made in September, NABE said.

This is also just inside the Federal Reserve's perceived comfort zone of 1 percent to 2 percent, the survey said.

Consistent with the cut in the 2008 growth estimate, the panel raised its forecast for the unemployment rate to 4.9 percent in 2008 from a previous forecast of 4.7 percent.

The panel also expects the price of a barrel of oil at $75 by the end of 2008, down from $90 a barrel for year-end 2007. Gasoline prices are expected to drift down to $2.72 a gallon from $3 for the same period. (Reporting by Nancy Waitz; Editing by Braden Reddall)

Oops. Missed by a bit there...