Is the Recession Really Over?

Public opinion surveys show that rich and poor share similar viewpoints on how the government should spend its money. CREDIT: stock.xchng

News sources are hinting that the end of the recession may be near. But how will we know when it’s really over?

The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) will tell us.

"Although most indicators have turned up,” it is too soon to tell if we have passed the recession’s trough, the NBER said in a statement on April 12.

The NBER determines when to declare a peak or a trough by examining statistics that show how well the economy is doing. These factors include the stock market, retail sales, housing markets, gross domestic income and unemployment rates.

Within a business cycle, a trough is the lowest point of production, while a peak is when the economy has reached the current highest level of production. A financial year is broken up into four three-month quarters. When the economy shrinks in two consecutive quarters, that's considered to be a recession.

The trouble with announcing a trough date too soon is the possibility that the economy will continue to get worse. In others words, it will be easier to officially pinpoint the end of the recession after the gross domestic product (GDP) numbers have steadily increased.

When the NBER has the data, they will declare that the trough has been reached. This will mark when the economy had reached its lowest point, and things can only improve from there.

"Business owners and shareholders have done pretty well," Gary Burtless, a labor economist at the Brookings Institution, a non-profit research organization in Washington, D.C., told Life's Little Mysteries. "The employed population has experienced small improvements in real weekly income, mostly because of gains in hours, but the unemployed have not seen many new job openings to choose from." 

Burtless, who was formerly an economist with the U.S. Department of Labor, went on to say that although the NBER hasn't declared the recession officially over just yet, many financial forecasters predict that the economy is on the slow path to recovery.

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