Many Will Be Blind When the Next Recession Unfolds

According to the U.S. National Bureau of Economic Research (the official arbiter of U.S. recessions) the Great Recession began in December 2007 and ended in June 2009, a period of 19 months.

Yet, many Americans (economists and policy-makers included) didn’t realize that the economy was truly in trouble until the financial crisis unfolded in September of 2008. By that time, the recession has been underway for nine months.

That's not uncommon. Recessions have a tendency to be underway for a while before they are fully recognized. That's partly due to the way a recession is defined.

The technical definition of a recession is two consecutive quarters of contracting gross domestic product, which is often referred to as negative growth (an oxymoron).

However, this does not necessarily need to occur for the National Bureau of Economic Research to call a recession.

According to the NBER, "a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

One primary indicator of recession is a rising unemployment rate. However, unemployment is a lagging indicator of a recession. Employment may remain elevated months after a recession has begun, as it did after the Great Recession began. Corporate profits are another lagging indicator. And, since it takes a month for the first estimate to be made and another month for the second estimate, GDP is itself a lagging indicator.

A recession typically lasts from six to 18 months, according to Investopedia. Economists say there have been 33 recessions in the United States since 1854.

Since 1960, the U.S. has gone through eight recessions -- an average of one or two recessions per decade. To be specific: one in 1960s, two in the 1970s, two in the 1980s, one in the 1990s and two in the 2000s.

The fact that the U.S. hasn't undergone a recession in nine years is kind of odd, at least by historical measures.

The period from March 1991 to March 2001, a 120 month stretch, was the longest period of economic expansion in U.S. history. The current expansion has been underway since June 2009, a span of 110 months.

This expansion will become the longest on record in July 2019, based on National Bureau of Economic Research figures that go back to the 1850s.

Simply put, this expansion is getting long in the tooth. Expansions don’t last indefinitely and the longer this one continues, the closer we are to the next inevitable recession.

When it arrives, don’t be surprised if the media, policy makers, economists and the some segments of the public don’t fully realize it for a while.