There's an organization that picks the "official" dates for the beginning and ending of recessions. It considers the recession as running from the top of the peak to the bottom of the trough in economic activity. That's a reasonable definition, but it produces a slightly odd result: At the start of a recession, almost everybody is doing great--we are, after all, at the peak. The "start of the recovery" (because it's the trough in economic activity) is often the point of maximum pain.

It's worth keeping this in mind as the recession grinds along. We're all looking forward to the end of the recession--to the point when things quit getting worse--but don't imagine that point as being the end of the pain. Better to think of it as the mid-point of the pain.

In an ordinary recession it's not quite that bad. The economy is full of forward-thinking people, so job losses and stock market losses tend to be at their worst early in a recession--everyone is looking ahead and trying to position themselves to survive the downturn. Then, once the bottom is in sight, people who foresee recovery try to position themselves for that as well--they try to buy cheap stock in companies that'll do well as the economy recovers, and they try to hire great talent when the talent isn't in a position to hold out for top dollar. That means that employment, wages, and stock prices all turn up pretty quickly--often starting to turn up even before the recession officially ends.

This recession, though, is a bit different. Most recessions are kicked off by the central bank raising interest rates to choke off inflation. That's not the case this time. This recession was caused by household balance sheets getting out of whack--too many people spent more than they earned to the point that now their entire disposable income is tied up servicing those old debts. We can't get a real recovery until people's balance sheets have recovered. That means that people need to spend less and pay off debts. Only once that happens are we going to have a recovery worth the name.

This could very likely mean a recession where the bottom is not so much the beginning of the recovery but just the end of things getting worse. The bottom may be only a few months away--at least, Ben Bernanke seems to think so--but I'm afraid that it's a bit of a leap to go from that to recovery.

So, the main point of this post is just to remind you that the end of the recession is not the same thing as a return to the way things were at the peak. It's fine to look forward to the end of the recession and the beginning of the recovery, just don't expect that things will be better immediately. Yes, that's the point at which things start to get better--but only in the sense that it's the point at which things are at their worst.