GDP is up, but recession conditions remain

The September quarter national accounts released last Wednesday have been interpreted by some commentators as heralding the end of the recession. If only that were true. Those commentators are confusing the change in economic activity with its level.

It is true that real GDP rose by 3.3% in the quarter — one of the largest quarterly increases on record — but it is also true that this followed the largest quarterly contraction on record, of 7% in the June quarter.

Assessments of where the economy stands in the business cycle require more than one quarter’s GDP —and indeed not just GDP, but a range of other indicators such as employment.

The fact is that despite the latest quarter’s surge in GDP, the level of GDP…