Current Recession Now Tied for Longest Since the Great Depression

The Commerce Department this morning announced its advance estimate of last quarter’s real GDP. As expected, the estimate shows that GDP fell in the first quarter of 2009 — by a hefty 6.1 per cent at an annual rate. An implication is that the current recession has just tied the post-war record for longevity.

The previous record-holders were the recessions of 1973-75 and 1981-82, each of them four quarters in length according to the official NBER chronology. In the current downturn, the NBER’s Business Cycle Data Committee determined that the economy peaked in the 4th quarter of 2007. Although the Committee won’t declare the trough of the recession until well after the fact, and the trough could well be a ways off, a negative 1st quarter of 2009 almost certainly means that the four-quarter benchmark has now been attained. (The Commerce Department often revises its GDP figures substantially between the advance estimate and the final number, and we are due for major backward-looking revisions in July. Indeed that is one reason why the NBER always waits so long to issue its findings. In the past, the size of the average revision has been just over 1 percentage point, whether up or down. It is highly unlikely that future revisions will change this morning’s negative number into a positive one.)

The NBER also keeps a more precise monthly chronology. The postwar record is 16 months, again shared by the 1973-75 and 1981-82 recessions. To match this monthly benchmark, the current downturn would have to have continued into April. Our best single indicator as to whether it did so will be the employment number to be released by the Bureau of Labor Statistics next Friday, May 8. It almost certainly will show that there were further job losses in April. If so, it will further confirm the dismal conclusion: one would have to go back 80 years, to the disaster of 1929-1933, to find a longer recession.

Comments

[conceptwizard:]

Maybe we wll break all standing records. Doesnt really matter at this point it will take a long while to work our way out from this mess at this point.

Apr 29 06:28 PM

[Steven Hansen:]

Very good summary - i missed thinking of this.

Gdp is a trailing indicator. so it really matters what lies ahead. the economy is short private investment money. but despite my critical attacks on the fed, they have kept the wheels on the cart even though i believe they have mortgaged recovery.

Apr 29 10:50 PM

[Moon Kil Woong:]

Cetin: I don't think quickly recovers is what people had in mind when they are talking about how long it has lasted.

Of course when the downturn started the government was in denial for almost a year which was extremely unhelpful. Bush Jr. must had learned that trick from his father Bush Senior who also was in denial about a falling economy.

As Steve Hansen points out, the jury is still out regarding whether the upturn will actually lead to a 2009 late recovery.

Apr 30 02:53 AM

[john s. gordon:]

current recession began in june 2007, that's when the housing bubble in sacramento started to deflate.
> jack

Apr 30 08:28 AM

[Jeff Frankel:]

Reply to John S. Gordon:

The NBER Business Cycle Dating Committee (of which I am a member) dates the beginning of the recession from the end of 2007. It is true that some indicators, like the housing market, went into decline before then. But other indicators, most of them more important, did not go into decline into later -- especially after the Lehman Brother bankruptcy in September 2008. For example, output continued to rise in the first half of 2008. It is reasonable to assume that the choice lies somewhere in between. And the BCDC in choosing to place the turning point at December 2007 paid a lot of attention employment which emphatically peaked in that month, and also real household income.
JF


On Apr 30 08:28 AM john s. gordon wrote:

> current recession began in june 2007, that's when the housing bubble
> in sacramento started to deflate.

Apr 30 09:08 AM

[Jeff Frankel:]

My personal inclination is not to attribute to his father W.'s habit of ignoring real-world data . George H.W. Bush was far better able to absorb information and to shift course when appropriate than was his son. A good example would be the Andrews Air Force Base agreement that he reached with Congress, which helped set the stage for a subsequent steady elimination of the budget deficit over the course of the 1990s.
JF


On Apr 30 02:53 AM Moon Kil Woong wrote:

> Cetin: I don't think quickly recovers is what people had in mind
> when they are talking about how long it has lasted.
>
> Of course when the downturn started the government was in denial
> for almost a year which was extremely unhelpful. Bush Jr. must had
> learned that trick from his father Bush Senior who also was in denial
> about a falling economy.
>
> As Steve Hansen points out, the jury is still out regarding whether
> the upturn will actually lead to a 2009 late recovery.

Apr 30 09:13 AM