Saturday, December 31, 2011

U.S. Economist Dissents, Saying Recession Is Over

WASHINGTON — In a rare public dissent, a member of the committee that officially dates the turning points in the nation’s business cycles said on Monday that he thought that the recession ended last June and that the panel should have said so.

The committee, part of the National Bureau of Economic Research, announced on Monday that it could not yet ascertain a trough signifying the end of the contraction and the start of an expansion.

“I strongly disagree with the committee’s decision,” the member, Robert J. Gordon, an economist at Northwestern University, said in a statement afterward.

The panel, known as the Business Cycle Dating Committee, was established in 1978 and has assigned the dates of peaks and troughs for every business cycle since 1854.

In a meeting on Thursday, the committee, which has seven active members, decided to make the unusual announcement that it had met but could not declare the recession over. Discussions over the details continued by e-mail through the weekend.

“Although most indicators have turned up, the committee decided that the determination of the trough date on the basis of current data would be premature,” the panel said.

“Many indicators are quite preliminary at this time and will be revised in coming months,” the panel added. “The committee acts only on the basis of actual indicators, and does not rely on forecasts.”

The committee also reaffirmed its earlier announcement that the recession began in December 2007.

If the recession did end in June, it would have lasted about 18 months, two months longer than any recession since the Great Depression.

Mr. Gordon said on Monday that he had been “the outvoted minority of one” on the panel.

“It is obvious that the recession is over,” Mr. Gordon said, adding that real gross domestic product, the broadest measure of economic activity, had recovered strongly from a low point in the spring of 2009 and would soon reach, or nearly reach, its previous peak in late 2007.

Indicators of industrial production, manufacturing and other economic variables pointed to last June as the trough, he said.

Other members of the committee have expressed concern that the upturn in economic growth, as measured by gross domestic product, while real, could be followed by a so-called double-dip recession. Such a downturn could, depending on its timing and magnitude, potentially be considered part of the same recession that began in 2007.

Mr. Gordon said, “The committee thought that, even if that probability was extremely small, it would be very costly to the committee to be proved wrong after the fact,” if it prematurely declared the recession over.

He said that there were “no plausible shocks” that could drive the economy below its last trough. Rather, if another cyclical downturn were to occur in the next year or two, Mr. Gordon argued, it would be considered a new recession, just as the 1981-82 recession was considered separate from the downturn of January to July 1980.



Post a Comment

<< Home