The Great Recession is Over! Long Live the Ordinary Recession . . .

There will be some good news and some bad news this morning at 8:30. That’s when GDP will be released.

The Good News will be that we are no longer contracting at the painful rate of 6% annually; Call it the end of the Freefall period we saw from September 2008 to March 2009. The Bad News will be twofold: 1) That the national economy is still contracting; the 2) Why we are contracting — the real world factors — will show the recession marches on.

My best guess — and given the oddities of this data point, we can only accurately call this a guess — is 1.5- 2.0%. If the number comes in negative, it will be the 4th consecutive quarter in a row of contraction.

In an odd twist, with US consumers are weaker than their Asian and European counterparts, it turns out to be a positive for the GDP data. Why? When imports fall faster than exports, it is a net gain for the way GDP is calculated. I know that sounds bizarre, but on a relative basis, less US consumption of imports, is additive to the final GDP number.

What else do we know about economic activity this quarter?

• Unemployment has risen;

• Wages continue to slide;

• Industrial production has fallen every month;

• Deflation continues to stalk many asset classes;

• Credit availability is weak, lending standards are tight;

• Capacity utilization is at a very low rate of 68%;

• Retail sales (other than gasoline price increases) are soft;

What does this mean in terms of the end of the recession? The NBER calls a recession –the way they use the word– as “a period of diminishing activity.” If economic activity is poor, but flat — meaning, a low plateau at the trough — they very well could call the end of the recession.

However, they describe their procedure for identifying ends of recessions by looking at when the contraction ends. That is unlikely to be Q2 of 2009.

As Paul Vigna notes in this morning’s WSJ, “The elements that will drive a recovery — rising wages, consumer demand, production and sales — haven’t appeared.”

Hence, regardless of GDP data, the Recession is likely continuing, albeit in an ordinary, form.

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