U.S. Federal Reserve chairman Ben Bernanke made the call in mid-September: “The recession is very likely over at this point.” Bank of Canada governor Mark Carney beat him by two months, stating in late July that economic growth would resume in Canada in the third quarter.
Such declarations, welcome as they may be, bring to mind three historical facts about economic downturns. They always end, equity markets start recovering before the economy itself, and economists usually tell us about the end well after it occurs.
But now that we’re here, is it possible to say exactly when the rebound began? Try Aug. 8.
Consider: The 12 economic contractions beginning with the crash of 1929 averaged 13 months from peak to trough. During these periods, the Dow Jones began to recover from its low an average of 152 days before the recession hit bottom and recovery began. This time, the Dow hit its low on March 9. Applying the 152-day average, we can say this recession ended Aug. 8.
The good news is the Dow grew by 43% in those 152 days, compared to average gains of 25% in the past 12 recoveries, indicating a robust return. The bad news: Collectively, the G7 countries have seen an average quarterly GDP decline of 2.9% since the start of 2008. So we face a lot of climbing to get back to where we were before this whole mess started.