Monday, December 1, 2008

NBER Makes It Official: Recession Started in December 2007

As I mentioned in the 3rd Quarter newsletter at some point in the future, the National Bureau of Economic Research would determine the economic situation we are experiencing to be a recession. Well, that time has come. Official recession watchers at the NBER said today that the U.S. economy is in recession, and it began in December 2007. Here is the text of their statement.

The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.

Read their full statement here.

Now the task at hand is for investors to ascertain the depth and length of this downturn. Since the stock market is a leading indicator of the economic cycle, once it can be determined that the economy is healing and poised for recovery, stocks will begin their next advance. While a recovery is something we are all hopeful will be occurring sooner than later, it is my opinion there will be some false starts before the next bull market begins in earnest.

John Kaighn

Jersey Benefits Advisors

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