On April 12, the Business Cycle Dating Committee of the National Bureau of Economic Research (whew, got that title?) announced after much deliberation that, no, the recession isn’t over. Headlines? Big news? Change your business?
OK, so maybe not.
Despite all the signs that the hulking economic ship is starting to navigate through an about-face, this group of eight high-placed economic professors and researchers, who come from think tanks like MIT, Harvard, Princeton, Stanford, etc., sat and thought and thought and thought and said, “Nope, not yet.” This was the group by the way that declared in December 2008 the start of the recession in December 2007. (Click here to read a memo about how the group calculates things like this.)
What kind of impact should this declaration have on everyday business people and consumers?
“Probably none,” said economist Jeff Frankel, on his blog. Frankel happens to be on the BCDC of the NBER (oooo, cool acronym, which is why we are using it although our writing professors would have failed us for it).
Why did the NBER (www.nber.org) nix the idea of the end of the recession? The committee reviewed the data and “decided that the determination of the trough date on the basis of current data would be premature.” It needs a trough or low date, followed by a rise in indicators, to call a recession done. This group said that was premature since the indicators are preliminary and may still change. Plus, the jobless rate has continued to be high, the panel said.
One of the panelists, Robert Hall, a Stanford University economist told the McClatchy newspapers for a story that he is optimistic the turnaround is indeed coming officially and may be announced soon. “If current forecasts hold,” he said, “that time will come in a matter of months.”
Then we have another esteemed panelist, Robert J. Gordon, an economist from Northwestern University, who so disagreed with his fellow economists that he issued a statement after the NBER statement that he disagreed and that the recession is over:
“It is obvious that the recession is over,” he wrote. He cited statistics that indicate it bottomed out way back in about June 2009. If you want to read the five-page, 1,626-word memo and his descriptions of “boomerang effect,” “rubber band effect,” and “reverse gravity effect,” you can take a look at his writings by clicking here.
Small business woes
But whether it’s over or not really doesn’t mean squat to your business. Either you’re doing better or you’re not. And the National Federation of Independent Businesses reported April 13 that most small businesses in fact are not doing that much better.
The Index of Small Business Optimism by the NFIB (do we dare call it the ISBO by the NFIB?) lost 1.2 points in March putting it at 86.8, which the group said is a bad thing. Ratings below 90, the group (www.nfib.com) reported, are “unprecedented in survey history.” The group also said the readings are still heading in the wrong direction.
“Something isn’t sitting well with small business owners,” said Bill Dunkelberg, NFIB chief economist, in a statement. “Poor sales and uncertainty continue to overwhelm any other good news about the economy.”
The index has posted 18 consecutive monthly readings below 90. In March, nine of the 10 Index components fell or were unchanged from February’s not-so-great readings. You can click here to read the entire NFIB statement.
But on the good-news front, job layoffs have stopped although whether that means jobs will be created is still to be seen.
“This sets the stage for job creation,” Dunkelberg said, “if owners become optimistic enough to think new hires can generate enough additional business to pay their way.”
To see the changes for yourself, take a look at a chart, below, from Macroeconomic Advisors comparing change in employment (gray line) and annualized Gross Domestic Product (GDP, blue line) from January 2007 to February 2010, the latest figures available. Both figures represented are three-month moving averages.