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September 4, 2009 - Let the Federal Reserve Call Recession’s End

Defining Recession – Forget the National Bureau of Economic Research and leave it to
the Federal Reserve
The NBER Business Cycle Dating Committee
The declaration of Recessions and when they end has been the job of the National Bureau of
Economic Research and Its Business Cycle Dating Committee.
The problem is that the announcement of the beginning of Recession is done months after
the fact and in the past two Recessions that were declared after those Recessions actually
ended. This makes the NBER process worthless.
Look at the 1990 – 1991 Recession
On April 25, 1991 the NBER told us that a Recession began in July 1990. GDP declined in Q4
1990 and Q1 1991, but they placed the beginning of the Recession months before GDP
peaked.
On December 22, 1992 NBER told us that the Recession ended in March 1991. So this
Recession was announced in the rear view mirror and was already over when they declared
it. How dumb is that?
Look at the March 2001 – November 2001 Recession
The declaration of Recession was made by NBER on November 26, 2001 as it was ending,
and the end of the Recession was declared on July 17, 2002, eight months after the
Recession was over.
In my opinion NBER’s Recession calls are worthless. Did you know that Ben Bernanke was
on The Business Cycle Dating Committee when the November 26, 2001 statement was
issued?
Isn’t it interesting that Bernanke, who thought the Recession was over, was a voting member
of the FOMC when the Federal Reserve cut the funds rate to 1% in June 2003?
Didn’t the Fed know that the Recession was already over, and that there was no need to push
the funds rate lower? Now Bernanke is Fed Chairman for four more years?
Look at the Recession that supposed to have begun in December 2007
The beginning of the current Recession was time-stamped December 2007 on November 28,
2008. How can that be when GDP did not peak until the third quarter of 2008 at $14.547
trillion?
Statistically we have had four negative GDP quarters since Q3 2008, and in my judgment a
bump above the zero line for GDP in Q3 2009 does not mean that the Recession is over.
Even if it is, which I doubt, the NBER will not tell us until the second half of 2010, when we
may already be in what many say will be a double-dip Recession.
The bottom line is forget the NBER and let the Federal Reserve decide Recession
cycles
The Federal Reserve did not see the end of the so-called 2001 Recession until June 2004,
when they finally began to raise the Federal Funds rate off the ridiculously low 1% level. I say
that this Recession never existed in the first place, as there were never two consecutive
negative quarters of GDP decline.
Wednesday’s minutes of the August 11 / 12 FOMC meeting indicated that the federal funds
rate will stay at zero to .25% for the foreseeable future. Thus the Federal Reserve considers
the Recession continuing.
Send me your comments and questions to Rsuttmeier@Gmail.com. For more information on
our products and services visit www.ValuEngine.com
That’s today’s Four in Four. Have a great day.

Richard Suttmeier
Chief Market Strategist
ValuEngine.com
(800) 381-5576

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website
www.ValuEngine.com. I have daily, weekly, monthly, and quarterly newsletters available that track a variety of
equity and other data parameters as well as my most up-to-date analysis of world markets. My newest products
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