Editor’s note: Dr. Michael Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook, and public policy.

RALEIGH, N.C. – Most economists now have come to the conclusion the nation’s economy is in a recession. The recession likely began in late 2007 or early 2008 and may last until mid or late 2009. If so, it will be one of the longest recessions since World War II.

What exactly is a recession? A recession means the economy is getting smaller – that is, receding. Recessions are part of the longstanding “business cycle”, in which our economy grows for a while, then recedes, then grows again, then again recedes, and so on. Each combination of a growth period and recession period constitutes one business cycle.

There have been 12 of these cycles since the 1940s. Fortunately, the growth periods have tended to be much longer than the recessionary periods, so the economy does make progress over time.

What causes recessions? Actually, that’s one of the all-time “big” questions in economics, a question that many brilliant minds have tried to answer (including the current chairperson of the Federal Reserve, Ben Bernanke, while teaching economics at Princeton). Some of the candidates are a major increase in the price of a key economic input, like oil, a sharp decline in the amount of money in circulation accompanied by a large jump in interest rates, and the bursting of a boom in a prominent sector of the economy.

It’s the last reason that seems to have sparked today’s recession. The sector that boomed was residential housing. Prompted by ample credit, low interest rates, and favorable tax laws, investment in residential housing surged in the early 2000s, and the surge sent house prices to previously unseen levels. But once interest rates rose, house prices fell, and loans based on the earlier high prices became toxic.

And since the residential housing market and the financial firms that back it are such a large part of the economy, the fall of housing eventually pulled the rest of the economy into a recession.

So we’re now seeing declining employment, rising unemployment, and reduced spending in the national economy. But what about North Carolina? Unfortunately, a national recession means just that – a national recession – and most states participate.

North Carolina is no exception. This year, jobs are falling at an annual rate of almost 2 percent, and the unemployment rate in 2008 will average over 6 percent, almost 1.5 percentage points higher than in 2007. The volume of retail sales is off over 8 percent, and after taking out inflation, wages are dropping by over 3 percent.

The housing slump has been felt in the Tar Heel state too. Existing home sales are on track to be down almost 25 percent for the year.

But it could be worse. Compared to the last recession in 2001, North Carolina has lost a smaller percentage of her jobs. Importantly, manufacturing jobs are down at half the rate in 2008 as in 2001.

Why the improvement? The short answer is that North Carolina’s great economic transformation of the last three decades – where the state’s leading industries have shifted from tobacco, textiles, and furniture to technology, health care, banking, and machinery and food manufacturing – has largely run its course. During the 2001 recession North Carolina was still losing tens of thousands of traditional manufacturing jobs. These jobs are still being lost, but at a much slower pace, and thus today’s recession is relatively less severe – at least, so far!

So how long will the recession in North Carolina last? I’m sorry to say I think it will continue for another six to nine months, and even after that, economic growth will be mild. The state’s unemployment rate will rise to above 8 percent in 2009 and perhaps hit 10 percent in early 2010. Government, from the state house to the court houses, will find their revenues down even as calls for help rise. Our elected officials will face tough decisions.

But the recession will eventually end, as they always do. At some point investors and entrepreneurs will see bargains they can’t pass up, and their increased spending will lead the economy out of the doldrums. But until then, we’ll all have to decide how to cope with challenging economic times.