The recession is officially over

But it’s not just the economy, stupid, it’s jobs

The National Bureau of Economic Research (NBER) said today that based on a number of factors the recession that began in December 2007 officially ended in June 2009.

This means that the recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.

In pinpointing the month the economy hit bottom the NBER said it places particular emphasis on measures that refer to the total economy rather than to particular sectors.

These include a measure of monthly GDP that has been developed by the private forecasting firm Macroeconomic Advisers, measures of monthly gross domestic income, real personal income excluding transfers, employment and aggregate hours of work in the total economy.

       
The NBER pointed out what most of us already new, this recession has been longest since WWII. But at least one thing that makes this contraction unique has been the damage it has done to the labor market.

Looking at the chart above, it took two years for employment to hit a bottom, with the the net loss totaling a whopping 6% from the peak employment level.

This compares very unfavorably to the roughly 3% decline experienced in the nasty recessions of 1973-75 and 1981-82.

Losses in employment were fast and furious in the ‘74 recession but were followed by a fairly brisk recovery.  It’s is worthwhile to point out that though the recession began in November 1973, companies were slow to cutback, adding workers until July 1974.

The contraction in the early 1980s saw employment bottom as the economy hit bottom.  And it didn’t take long for the robust recovery to begin generating substantial gains in employment. Remember President Ronald Reagan’s 1984 campaign slogan “It’s morning in America?”  Job growth was impressive in 1983 and 1984.

This time around the economy continued to experience a net loss in employment even after the recession ended.  And given the heavy amount of uncertainty still facing businesses and the shallow recovery, job gains have been frustratingly slow.

Consequently, though the statisticians have declared that the recession is over – and the data does bear this out, many of us don’t “feel” as if the recession has ended because of the lack of employment growth and ongoing problems in the housing market.