Looks Like We Are “Officially” In a Recession
The National Bureau of Economic Research (“NBER”) announced recently that the U.S. recession officially began in December 2007. The pegging of December as the recession’s start date surprised many since academia and the media often define a recession as two consecutive quarters of negative Gross Domestic Product (“GDP”) growth. According to this definition, we will not know that we are in a recession until the 1st quarter of 2009 when 4th Quarter 2008 GDP figures are made available. However, the NBER Business Cycle Dating Committee uses a more complex formula, analyzing data including real GDP, real income, payroll employment and industrial production factors. They appear to define a recession as a significant decline in economic activity spread across the economy that lasts more than a few months.
Regardless of the definition, the U.S. economy is clearly hurting now, has been hurting for quite some time and likely will be hurting well into 2009. The November jobs report confirmed this bleak outlook. After factoring in revisions to previously reported September and October figures, November’s job loss of 533,000 represented the biggest single month reduction in jobs in over 30 years and the Unemployment Rate now stands at 6.7.
The question of whether or not we are in a recession is no longer relevant. What is relevant, which I will explore in a future blog, is how long the recession will likely last, how deep the recession will likely be and how much of an impact the U.S. recession will have on global markets.