Dateline: June 2010. The recession is over... (and it has been for nearly a year)

Remember how the beginning of the recession was announced?

It wasn’t.

For much of 2007, and virtually all of 2008, consumers and companies knew something was wrong. But anytime it was brought up, someone on Wall Street, at the Treasury, or in the White House would essentially say, “No, a recession is defined as two consecutive quarters of negative growth in the GDP, so technically, we’re not in a recession yet.”

Then, on December 1, 2008, it was made official. Not only that we were in a recession, but that we had been for a full year. Why am I re-hashing all of this? Because: A recovery will be announced in virtually the same way.

To say that a recession exists when there are two quarters of declining GDP is not entirely accurate. The basis of a recession involves much more than that, including real trade and manufacturing sales, personal income rates, inventory liquidations and more (including two consecutive quarters of a drop in the GDP). All of this is why I’m not a math person. But the important point is this: These measures are taken over time. And by the time all of these indicators confirm that the recession is officially over, the recovery will have been underway for twelve to fifteen months.

A recession is not one singular event with a clear beginning or end. It is a set of complex criteria, which relies on historic data more than today’s information or tomorrow’s forecast.

Implications: If you’re waiting for someone to give you the green light, indicating that it’s time to start getting back to normal, you’re likely to be run-over from behind.

Editor’s note: I had the privilege of attending the recent ANA conference in New York, where the best speaker of the day was the chief investment strategist from Charles Schwab. Her name is Liz Ann Sonders, and she gave wonderful—useful—clarity to how recessions work, and what we might expect from a series of economic recoveries. I share more about what I learned at that event at a posting titled, “Enough about recessions. Let’s talk about recoveries.”

Mike Anderson