(And why this doesn’t matter for President-Elect Obama)
The best place to start when answering this question is the past. Once we can see what’s happened before, we can begin to assess what might happen next.
The following statistics come from the US National Bureau of Economic Research.
America’s Business Cycle Dates. Duration in Months
Peak Trough Peak to Trough Trough Peak
Trough to Peak to Trough to Peak
Feb 1945 Oct 1945 8 80 88 93
Nov 1948 Oct 1949 11 37 48 45
Jul 1953 May 1954 10 45 55 56
Aug 1957 April 1958 8 39 47 49
April 1960 Feb 1961 10 24 34 32
Dec 1969 Nov 1970 11 106 117 116
Nov 1973 Mar 1975 16 36 52 47
Jan 1980 Jul 1980 6 58 64 74
Jul 1981 Nov 1982 16 12 28 18
Jul 1990 Mar 1991 8 92 100 108
Mar 2001 Nov 2001 8 120 128 128
The Peaks are the point at which America’s economy is at its strongest and the Troughs are when its at its weakest, within the cycle.
As you can see quite clearly, America, like most countries, spends much more time growing (Trough to Peak) than shrinking (Peak to Trough). However, those periods of expansion and contraction vary considerably from business cycle to business cycle.
Americas ten year expansion from March 1991 to March 2001 was the longest for at least 150 years – the length of time the National Bureau has data for.
So, to answer the original question, how long is this recession likely to last? The maximum length of a Peak to Trough in the last 60 years has been 16 months. If we hope that this recession is no worse than that, and there seems to be no evidence that specific factors are going to cause an abnormally long recession (indeed with globalisation, the World’s economy is more diversified than ever and so should be more robust), and given that the National Bureau have decided that the Peak of the Cycle was December 2007, then the Trough should be around March 2009.
Although the US economy will start growing from that point, people probably won’t start feeling the benefit for around another year as the slack (that has developed in the recession) gets taken out of the economy. This slack is measured in unemployed people and companies producing less than their capacity.
Whatever does happen, it won’t matter for Obama – the recession can be blamed on President Bush and by the time his re-election comes around in 4 years the economy will be growing again, probably strongly, making him a shoe-in. The only thing that could stop this happening is if he manages to become generally unpopular in the meantime for unforeseen policy mistakes.