While economy is improving, many still hurt

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The Federal Reserve Board last week kindled hope that the nation's longest recession since World War II is nearing an end.

The central bank's survey of current economic conditions showed that among the Fed's 12 districts, economic activity has firmed up in one, improved in five and stabilized or showed signs of stabilizing in another six.

Global Insight economist Brian Bethune said the Fed report "is picking up this palpable improvement in the tone of the economy."

"(It) is consistent with our September outlook, which forecasts a conclusive end to the production and residential housing recessions in the third quarter of 2009," Bethune wrote.

With unemployment at 9.7 percent, there is a considerable army of the financially debilitated who find all this conjecture that the recession is throwing in the towel a tad premature. Most economists believe that unemployment will top 10 percent before subsiding. A streak of four quarters of negative economic growth isn't expected to end until results for the third quarter are posted later this year.

If your checkbook, 401(k) statements and credit card bills are telling you the recession still has legs, you are not alone.

The recognized expert in determining when recessions begin and end -- the Business Cycle Dating Committee of the National Bureau of Economic Research, or NBER -- more than likely won't make the call for months. In other words, the average American will know it well before the judgment becomes official.

Founded in 1920, the NBER is a private, nonprofit, nonpartisan research group that is top-heavy with Nobel economists and former chairmen of the President's Council of Economic Advisers. NBER's scorekeepers define a recession as "a period of falling economic activity spread across the economy, lasting more than a few months." In addition to the gross domestic product, NBER's referees consider income, employment, industrial production and wholesale as well as retail sales.

"There is no big debate about whether these are the right people to do it," said Bank of New York Mellon Chief Economist Richard B. Hoey. "The general consensus in the economic community is that they are the official arbiters."

NBER's interest in recessions is purely intellectual. By defining when they begin and end, the research group provides a standard time frame for those who study past recessions for the purpose of being better equipped to combat future downturns.

The bureau's economists are a conservative lot. They do not make forecasts, which makes them wrong far less often than their prognosticating brethren. Moreover, they do not make snap judgments about past events, patiently waiting for the federal government to revise GDP and other economic statistics before delivering their pronouncement.

NBER identified December 2007 as the starting date of the current recession but did not pass judgment until December 2008. By then, any retail clerk, mortgage broker or real estate agent could have told you a recession was well under way.

By NBER's reckoning, the previous recession ended in November 2001, eight months after it began. However, the economic think tank's official pronouncement wasn't made until July 2003, 19 months after the fact.

"The committee waited to make the determination of the trough date until it was confident that any future downturn in the economy would be considered a new recession and not a continuation of the recession that began in March 2001," NBER said at the time.
As for this recession, Hoey believes the economy hit bottom sometime between May and August. It most likely happened in July and "clearly wasn't prior to May," he said.

"I think we'll get confirmation in about 18 months from the NBER," Hoey said.

The same economists who are lifting your spirits with speculation that the recession is nearly spent are tempering them with forecasts that the recovery will lack the ebullience that followed recessions of similar magnitude.

In the past, recessions this severe have given way to recoveries just as robust, according to Hoey. If that held true, economists would expect economic growth of about 8 percent. Instead, the Bank of New York Mellon economist is forecasting growth of 3 percent to 3.5 percent. He is not alone.

"I think we're going to have a jobless recovery," predicted Bernard Weinstein, an economist who teaches at Southern Methodist University. "Most businesses are not going to hire full-time workers until they are convinced the economic expansion is taking hold and is going to continue."

No matter when the official scorekeeper makes the call, determining when a recession ends is largely a personal decision. It is based on when someone feels comfortable upgrading from McDonald's or Wal-Mart, or hopping on a jet for a long weekend, or decides it's time to dump the clunker even though there's no federal subsidy in it.

In other words, if former U.S. Supreme Court Justice Potter Stewart was still alive, he might tell you it's no different than pornography: You'll know it when you see it.

Reach Len Boselovic at lboselovic(at)post-gazette.com . For more stories visit scrippsnews.com

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