The Dow Jones Industrial Average has surpassed 11,000 today for the first time since September 2008. Yet, the U.S. could still be in recession, according to a statement released today by the National Bureau of Economic Research's Business Cycle Dating Committee. The group of academic economists declined to declare the recession over. According to the stock market, however, Wall Street would beg to differ. Who's right? Possibly neither.
Those Conservative Economists
The economists cited above have reason to be reluctant in asserting that the U.S. is in recovery: they don't want to be wrong. Their discipline is coming out of a very difficult time period when a near-depression caused them to question some of their very base assumptions. The last thing academics want to do is wave a "Mission Accomplished!" flag, only to look absurd again if they're wrong.
But it's also reasonable to remain cautious. Unemployment hasn't shrunk by much; underemployment remains frighteningly high. Although those are lagging indicators, they have an effect on consumer spending. The housing market also remains fragile. Foreclosure rates are still stubbornly high, and it's hard to gauge how much demand there will be for home buying when the government credit expires in April. Finally, GDP has increased significantly, but much of that could be due just to government stimulus, so it's hard to determine how much sustainable economic growth has occurred.