May 2014 Macro Pulse -- When Does a Recovery Stop Being a Recovery?

As of June 2014, five years (60 months) will have passed since the official end of the Great Recession in June 2009. The average post-WWII expansion lasted 58.4 months (median = 45 months), with a range between 12 and 120 months. In terms of longevity, then, the ongoing business cycle has definitely reached middle age.

The term “recovery” refers to the initial phase of a business expansion when the economy is growing vibrantly following the business cycle trough (i.e., end of recession). By most metrics, this recovery has been tepid. GDP growth, for example, typically “rockets out of the gate” during the first quarter after the end of a recession (average = 7.3 percent) and then gradually loses steam. The current business cycle, by contrast, posted a beginning-quarter expansion of only 1.3 percent, then meandered aimlessly (the economy actually shrank by 1.3 percent in 1Q2011) before finally hitting a post-recession high of 4.9 percent 30 months later (in 4Q2011). Someone coined the term “trampoline economy” to describe the up-one-quarter-down-the-next behavior.

So, we return to our title question: When does a recovery stop being referred to as a “recovery?” What term should be used when the normal post-recession vibrancy is essentially lacking? And can one describe what is likely to be the “downhill” half of a business expansion as a “recovery?” 

Click here to read the rest of the May 2014 Macro Pulse recap.

The Macro Pulse blog is a commentary about recent economic developments affecting the forest products industry. The monthly Macro Pulse newsletter summarizes the previous 30 days of commentary available on this website.