The U.S. economy is now well into its 11th postwar recession

The National Bureau of Economic Research has finally confirmed what the real world has known for at least a year: The U.S. economy is now well into its 11th postwar recession.
Although the bureau says that it takes anywhere from six to 18 months to determine that a peak in economic activity has been reached, this one has taken longer than its four immediate predecessors. 

The bureau says that the latest business cycle peak was reached a year ago, in December 2007. 
By contrast, the March 2001 peak was announced eight months later, while the July 1990 peak was determined within nine months. The July 1981 peak was set six months after the fact, while it took only five months to establish that a peak was reached in January 1980. 

To be fair, some members of the bureau's Business Cycle Dating Committee have felt for several months that the economy was in a recession. However, they have deferred to the collective judgment of the committee, which was not reached until Friday. 

The next question is, Who cares? The answer: Anyone who is interested in forecasting. This means economists, investors, policymakers and business people, just to name four categories. 

By dating the beginning and end of recessions, comparisons can be made with the previous downturns in order to determine the odds of a further decline. And while different recessions have different causes, such comparisons can be useful. 

For example, the shortest postwar recession lasted only six months, while the longest was 16 months. The average, according to the bureau, is 10 months in length. 

At 11 months, the current recession is already longer than average, and rapidly closing in on the two longest recessions: 1973-75 and 1981-82. 

If the latest recession does no more than equal these two, then it could be over as early as the end of April. However, given the way the data are unfolding and the causes of this particular downturn, this seems a bit optimistic. 

Most economists figure that the economy will decline at least until the middle of 2009. That would make this recession the longest of the postwar era, at 18 months in length. Some think it could be even longer than that. 

But as unique as the current recession might seem, what also is different is how quickly both monetary and fiscal policies have been marshaled to cushion this downturn. 

Recall that the Federal Reserve began cutting interest rates in September 2007, three months before the recession officially got underway. And besides the budget deficit (which is, itself, stimulative), Washington doled out tax rebates totaling over $150 billion this summer. 

Both the monetary and the fiscal authorities have indicated that there is more stimulus in store, as in Monday's speeches by Ben Bernanke and Hank Paulson. And if the government can set a floor for housing prices, so much the better. 

In my view, the most likely outcome is a recession whose length will exceed the postwar record but whose severity might not even be as bad as the 1981-82 downturn. 

At the end of that recession, the jobless rate wound up at 10.8%, the highest since 1940. No one is forecasting that we will see this number this time around, at least not yet.