The Business Cycle Dating Committee of the National Bureau of Economic Research indicated today that the recession which commenced in December 2007 ended in June 2009. The 18-month recession is the longest on record in the post-war period. The 1973-75 and 1981-82 recessions lasted 16 months. The announcement is an official ritual; for all practical purposes, it has been widely known the recession ended in the middle of 2009. The important difference to note is that the pace of economic growth in the current recovery is significantly slower compared with the recoveries following the 1973-75 and 1981-82 recessions. Chart 1 is an index chart where real GDP in the trough quarter is set equal to 100 and GDP readings are recomputed as indexes. An index reading of 105 implies that real GDP has risen by 5.0% from the trough. Real GDP rose 6.2% and 7.7% at end of four quarters of economic recovery following the 1973-75 and 1981-82 recessions, while it has risen only 3.0% after four quarters of economic growth this time around (see chart 1).
The Federal Open Market Committee's (FOMC) policy statement released after deliberations tomorrow will be scrutinized extensively for hints about the Fed's next policy action. The Fed is most likely to maintain the message that "exceptionally low levels" of the federal funds rate are warranted. President Hoenig of the Kansas City Fed dissented at the August 10 meeting and a similar vote should not be surprising on September 21.
For the full Daily Global Commentary, "The End of the Great Recession is Official," is attached as an XML feed.
