When even Newt Gingrich has an opinion about the duration of the recession, you know economic forecasting is now officially as out of control as, say, U.S. mortgage lending was a year-and-a-half ago.
Reasonable people think we’ll hit bottom anywhere from a few months to a few years out. Gingrich, a former House of Representatives Speaker and all-around gloomy anti-bailout Republican, thinks the U.S. won’t be in good shape for three-to-five years.
But really, though, how long is it going to take before job losses, bailouts, falling share prices and slumping GDP numbers yield to good news? If history is any guide, Canada’s economy should look a lot better by late 2010.
How do I know this? Well, the National Bureau of Economic Research in the U.S. records 32 economic cycles since 1854 — a cycle being the period from one peak of economic activity to another.
On average, recessions last 17 months while periods of expansion are more than twice as long, typically 38 months. In the period from 1945 to 2001, during which the U.S.
experienced 10 economic cycles, the numbers are more congenial. Post-war recessions average 10 months with growth periods running 57 months, perhaps a tribute to the economic management tools developed in the wake of the Great Depression.
But let’s be cautious. Using the broader, 155-year averages, and accepting the consensus that the U.S. economy peaked in December 2007, Americans should hit bottom roughly in May.
Thereafter, we could see a gradual return to growth that tops out in about July 2012.
Canada, however, didn’t peak until the third quarter of 2008, roughly nine months after the U.S., which suggests we may not even bottom until February 2010. Then, things could improve briskly, paced by a U.S. economy that’s already in second gear.
Averages are just averages, of course. And other factors — our national economic dependence on commodities like oil and gas, for example — can make economic forecasting a mug’s game.
As a fallback position, consider a doomsday scenario. With the sole exception of the Panic of 1873, when the collapse of the Northern Pacific Railroad triggered a 65-month slide in the U.S., the 43-month Great Depression is the worst North America has endured. Using that standard, the U.S. won’t bottom until July 2011 and won’t really be humming until late 2012.
Which, come to think of it, is pretty much what Newt thinks will happen.