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When Will the Recession Be Over?

Written by

John Hunter

in

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6 months ago I figured we could hope than in late 2009 we would see the beginning of the recovery. I am much less optimistic about the later half of 2009 now. The initial reports for the last quarter of 2008 showed GDP Down 3.8%, the worst since 1982. That has now been updated to an annualized decline of 6.2%. Still the economy actually grew for all of 2008 by just over 1%, something I don’t think most people realize.

The New York Times has published the thoughts of several economists on When the Recession Will End, from the always true to the “dismal science” name, Jame Grant, “the end is unknown.” A. Michael Spence, 2001 Nobel Prize in Economics, “The short answer is not soon“:

The recession is global: exports, production and consumption are in high-speed descent. The headwinds are powerful because of excessive leverage, damaged balance sheets and the resulting tight credit.
…
Governments and central banks are the only major sources of credit, liquidity and incremental demand — private capital and sovereign wealth funds, having experienced losses, are largely sidelined. If governments are quick and clear in their intentions and intervene in a coordinated way in both the real economy and the financial sector, we will probably have an unusually long and deep global recession through 2010. If they don’t, it is likely to be worse than that.

Nouriel Roubini, this recession may last 36 months:

Today, as we enter the 15th month, it’s obvious that we are already in a painful U-shaped recession that has become global and will last at least until the end of the year — 24 months, the longest since the Great Depression. Even if the gross domestic product grows in 2010, it is likely to be no higher than 1 percent. And at that rate, with the unemployment rate rising toward 10 percent, we will still be substantially in a recession.

And from the Google CEO

But when looking at our economic decline, we can all agree on two things: we did not get here overnight and we will not recover tomorrow.
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By the end of the year, we may see some growth, with gains in employment to follow a few months later.

I am much less confident that by the end of 2009 we will be in a recovery. That is still very possible, but I am much more worried we will not be. Frankly if we keep the decline in the 2009 GDP to under 2% I think that will be a success. And if the 2010 GDP declines less than 1% or increases I think we should be happy. Another key is how high the unemployment rate goes. It is almost certain to go significantly higher. If 2010 sees a return to the decent or good job growth that will be a huge success. But job growth the last 8 years has been horrible (500,000 more jobs lost).

Related: Uncertain Economic Times (March 2008) – The Economy is in Serious Trouble – What Should You Do With Your Government “Stimulus” Check? – Economic Fault: Income Inequality

Comments

4 responses to “When Will the Recession Be Over?”

  1. Jerremy Morrison Avatar
    Jerremy Morrison

    Here, you have discussed such a topic which has no exact and accurate answer. Because nobody is able to foretell the future. The pathetic economic condition is still live. You said that before six months we had expected that the recession will be over by the end of the year,2009. I also hope the same. Now only time will give us the answer.

    Reply
  2. jeflin Avatar
    jeflin

    I doubt the recession will end by 4th quarter of 2009. A few years of slow growth is also expected since free and easy leverage for investment, production and consumption will be restricted.

    But the way the stock market is going in recent weeks, we are getting ever closer to a bottom. Just stay out of the maelstorm for now.

    Jeflin

    Reply
  3. Manshu Avatar
    Manshu

    No one has any answers as to the real time for the recession to get over. I just hope it doesn’t turn into a depression before it gets over.

    Reply
  4. jim Avatar
    jim

    I am much less confident that by the end of 2009 we will be in a recovery. That is still very possible, but I am much more worried we will not be. Frankly if we keep the decline in the 2009 GDP to under 2% I think that will be a success. And if the 2010 GDP declines less than 1% or increases I think we should be happy. Another key is how high the unemployment rate goes. It is almost certain to go significantly higher. If 2010 sees a return to the decent or good job growth that will be a huge success.

    Reply

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