Evidence is growing that the recession is over. This is at odds with some recent Fed comments. which suggest that the low interest rate policy will last for the rest of the year. The exception to the recovery story has been in two areas, employment and housing, but even here patterns are falling into place which suggest we have turned a corner.
The employment numbers have started to move positive, but the last two recessions have had very shallow recoveries especially with respect to job creation. This recessions seems to be following the same pattern. Take away the analysis of the poor employment picture which is a lagging indicator and the overall economic story looks like it is clearly improving.
The housing area is also showing improvement with some areas actually producing price gains but this part of the economy has a long way to go before there are actual improvements in consumer wealth. An important story in the housing area is the fact that this it will not be a driver for future economic growth but this is a good thing. Do we need more housing in the country? Absolutely not. There can be a new balance in the economy that can lead to higher productivity and export growth. Nevertheless, new construction will be a drag on both growth and employment.
One of the voters on the NBER recession dating committee is Jacob Frankel. He is clearly arguing that the recessions is over in his weblog. His two graphs above suggest that employment is following the pattern expected in a recovery and points to a recovery.
However, there is a difference between saying the recession is over and that we have made up the output gap. It seems like many analysts are confusing the difference in an economic turn around and a reversal of the output gap.
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