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NBER Declares the Recession Has Ended

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The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) -- the anointed eggheads that determine turning points in our economy -- has spoken: The recession ended and a recovery began in June 2009.

This might be news to a lot of your friends and neighbors, seeing as they all remain racked by fear, uncertainty and doubt -- known as FUD to marketing types. But, to the NBER crowd, that doesn’t matter.

“In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity,” the economists reported in a statement. “Rather, the committee determined only that the recession ended and a recovery began in that month.”

Nigel Gault, chief US economist at IHS Global Insight, emphasizes that this decision doesn’t imply that the economy is hunky-dory, but merely means that the committee feels confident that it can identify a mid-2009 trough in activity, and that a recovery began at that point.

Nor does the determination mean that the economy can’t “double-dip.” It just means, says Gault, that a renewed downturn, should it occur, would be treated as a new recession and not as a continuation of the one that began in December 2007.

As for his own outlook, Gault is betting on a continuing but painfully slow recovery. He puts the odds of a relapse into recession at 25%.

Others put the odds higher.

Dr. Gary Shilling of A. Gary Shilling & Company reminds us in his most recent research report that in the typical post-World War II economic recovery, four cylinders fire to push the economic vehicle out of the recessionary mud and back out on to the highway of economic growth, as he puts it.

At present, only one -- the ending of inventory liquidation -- is generating significant power. The other three -- employment gains, consumer spending growth, and a revival in residential construction -- are sputtering at best, Shilling says.

Odds of a double dip, in his opinion? 50%.
POSITION:  No positions in stocks mentioned.