The Recession

Some Say the Recession is Already Over

| by Reason Foundation

By Tim Cavanaugh

Is our long international nightmare over? Has the recession ended already? Yes, says Bank of America Merrill Lynch. (Now there's a company that combines the two names everybody thinks of when they think of sound financial planning and long-term economic vision.) According to a report by Michael Hartnett, head of the bank's research investment committee, "Our global economists believe the recession ended in Q2 2009 and a fragile recovery has begun." Tom Petruno, the token non-idiot on the L.A. Times' business desk, has some details on the report.

Hartnett is not alone in his view. Treasury Secretary Geithner says the "force of the global recession is receding," which raises the question: When something recedes, is that a recession? CNBC Squawk Box co-host Joe "Big Kahuna" Kernen hollered yesterday that the recession was over, while the financial network's walking quality of life violation Dennis Kneale screams at "nay sayers" and "bloggers" in this recession-is-over peroration:

And the Dow is rallying today.

So is the recession over, dammit? Calculated Risk describes how difficult it is to mark the exact point of any market bottom.

Beyond that, I'd note that much of the above is based on earnings reporting from companies, which is a poor yardstick because a company can always improve its earnings through cutbacks. That's the case in almost all reports coming out now. Consider the rail company CSX, which managed to score good earnings, but only by massively cutting down its capacity, a practice CSX expects to continue at least through the third quarter.

I single out CSX because Warren Buffett's attentiveness to freight transportation makes sense: It's an actual measure of how much stuff is getting moved around and sold. And the Freight Transportation Services Index has been dropping off the River Kwai bridge lately, with no end in sight.

So, some questions: When industrial production continues to fall, is the recession over? When you more than double the monetary base and still can't create any inflation, is the recession over? And yes, I know it's all bleeding-heartish and non-economical to take unemployment into consideration in this great era of the jobless recovery, but when you're still losing half a million jobs a week, is the recession over?

I don't know, and neither do the self-interested actors spouting off about the end of the recession. History may decide that mid-July 2009 was in fact the end of the recession. We'll have to wait and see. But one thing you can be sure of right now: The supporting evidence for all this end-of-recession talk is a bunch of baloney.