Declaring the US recession over may take more than a year because of the risk that signs of stabilisation will prove short-lived, according to the head of the group charged with making the call.
"We are serious about being sure that the apparent upturn is not just a part of
a longer decline," Robert Hall, who heads the National Bureau of Economic Research's Business Cycle Dating Committee, said. The group will "wait for activity to surpass its previous peak," which may take 18 months or more to determine, he said.
Hall's comments signal he's less willing than other members of the committee to say the recession has ceased.
Fellow panel member Jeffrey Frankel last week said the smaller drop in employment and decline in the jobless rate indicated the slump may have ended in July.
"For an exceptionally deep recession, a longer waiting period makes sense," Hall said.
Declaring the 2001 downturn over was complicated by ongoing job losses, and that may happen again, Hall said. The group took until July 2003 to declare that slump had ended, 20 months after the fact.
"The committee will have to reconcile positive GDP growth with shrinking employment," said Hall, a Stanford University professor. "I personally put substantial weight on employment, so I may be leaning toward a later date."
Among the top indicators the group uses is payrolls. Employment fell by 247,000 last month, the smallest decrease since August 2008, and the jobless rate dropped for the first time in more than a year.
Complicating a recovery call is the possibility that renewed declines in financial markets or home prices will cause the economy to shrink again, said Harvard University economist and member of the committee Martin Feldstein.
"There is a risk that we will have a couple of good quarters and then suffer a temporary setback at the end of 2009 or start of 2010," said Feldstein.
Frankel was more upbeat last week following the unemployment report for July. "I haven't felt that there have been any previous months for saying this will turn out to be the bottom, but this one is definitely a candidate," Frankel, a professor at Harvard University, said.
- BLOOMBERG
Declaring the US recession over may take more than a year because of the risk that signs of stabilisation will prove short-lived, according to the head of the group charged with making the call.
"We are serious about being sure that the apparent upturn is not just a part of
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