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Americans have plenty of reasons not to trust the Business Cycle Dating Committee of the National Bureau of Economic Research, which said Monday that the Great Recession was over.
In August, 27 states reported higher unemployment rates than the previous month - 7 million jobs lost during the recession. The number of people living in poverty - including one in five children - was higher last year than in the previous 50 years. One in 10 households has missed at least one mortgage payment, and one in five home-owners owes more on their home than it's worth.
Given the millions of people who are hurting, it's hard to believe the nation is recovering from its 18-month-long recession, the longest since World War II and the deepest since the Great Depression of the 1930s.
But that's because a recession isn't determined by the experiences on Main Street, or in America's living rooms. It's decided by academics and economists.
The declaration that a recession has begun or ended is technical and based on when the economy began a steady decline and when it reached its lowest point.
Officially, the recession began in December 2007 and reached its nadir in June 2009, the committee said.
The factors determining the start and end are gross domestic product, which has been growing steadily for a year; income, which has been increasing since June 2009; industrial production, now 6.2 percent higher than a year earlier; retail sales, up nearly 5 percent over a year ago; and employment.
Unemployment, now at 9.6 percent, was at its highest rate during this downturn in October 2009, when it hit 10.1 percent.
Despite the declaration that the recession is over, growth since June 2009 has been anemic, confirming for everyone that the official end of the recession doesn't mean property values will increase or that everyone who wants a job will be able to find one.
Would that it were so.
Sadly, few people are celebrating raises this year. Plenty of people are still out of work or employed in jobs for which they're overtrained. The financial forecasts for local governments show house assessments continuing to decline. Despite a blip in August construction starts, the real estate market is still stalled. Hampton Roads is fighting to keep its recession-proof, military-based economy intact.
The bit of good news, however, is that the experts say the slowdown we've seen lately doesn't indicate a double-dip recession is taking hold. The recovery has been plodding but steady. The major market indexes, which lost more than half their value in the recession, are coming back.
And on Monday, a group of economists announced that the recession - officially, at least - was over.
For now, we'll take whatever bit of positive spin we can get.
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Maybe if they tell us the
Maybe if they tell us the bad times are over enough times we will believe it and vote Democrat in November. We all know why they are saying it now.
Whew its over!
Thank God! The recession is over. People are back to work, tax revenues are up, the stock market is soaring, home prices have recovered and homes are selling. Heck life is good....right?
If this is a recovery I would hate to see what a continued recession would have looked like!
A problem of definition
The primary statistic used to determine whether we are entering of exiting a recession is change in the Gross Domestic Product.
The problem is that government spending is included in determining the GDP. While it makes some sense to include government spending paid for with taxes, including government spending on borrowed money is misleading. It would be like weighing yourself while infected with a massive tapeworm, it all registers on the scale, but its not all you.
Including deficit spending in the GDP to declare a recession over is like supplementing your income with credit card borrowing with no plan for paying it back, and telling your wife you got a raise. In reality, your spending is no longer an indication of your productivity.
If we recast GDP excluding deficit spending, we are still in a deep recession which has lasted since the collapse of the DOT.com bubble.
Have a plan to pay it back
You make a good point about the debt. If I take out a loan and spend it on a new car, new house, and vacation with no intention of paying it back then it certainly should NOT go down as part of my personnel GDP, but if I do and can pay it back then it should, because this is, in fact, what most people do. I would not be living in a house right now if I could not take out credit. Credit has greatly improved our lifestyles, but can have bad effects if we take out more than we can pay back, or worse if we just refuse to pay it back.
Take a look at the debt run up under Reagan, Bush, and Bush, and you can see (by looking at debt levels) tax cuts and spending that went unpaid for and with no plan for repayment. Clinton then offered a balanced budget that not only payed down the National debt, but helped turn around the economy. How many Republican votes did it get? - ZERO!!
Using proven economic philosphy and CBO analysis, Obama has taken us into debt to save the economy and it seems to be working, only time will tell if it works this time. Using scientific analysis and proven techniques is much better than using a blind dogmatic approach to the economy which has never work
This is a simplistic
This is a simplistic understanding of the relationship between deficit spending's effects.
If only the VP did not a 750 character limit...
I will stick to this point: you are forgetting that government spending adds to private investment firms’ current cash flow and therefore boosts private investment. The government is in many ways one giant customer with great credit terms. One dollar spent now can have a ripple effect (of course, it depends on HOW that dollar is spent).
If we were living at a time of high interest rates, I would be more inclined to agree, but interest rates are (rock-bottom scary) low. There is no threat of the crowding-out of productivity-increasing private investment.
Oh, brother. You spend most
Oh, brother.
You spend most of the letter focusing not on the issues, but on my TITLE.
By changing the subject, all you have done is show the rest of us that you really have no coherent answer to the objection I raised.
I am not sure you even understand my objection.
Simply put, it would be impossible to calculate GDP WITHOUT taking borrowed money into consideration, because the borrowed money can be used to increase goods and services produced. If the money is used properly, and borrowed at a low enough rate, the quantity of goods and services produced could increase at a level that more than justifies the costs of borrowing.
And that would be a GOOD thing to our children and grandchildren. Right?
Btw, you can call me Glen, if you want. :-) And I will look into removing the title--if I have time this week.
Who should we trust?
Great Points - Glen
If I am not mistaken, our payment on the National Debt - as a percentange of GDP - is lower now than Reagan, Bush, Clinton, or Bush. So it's like when you finance your house, a lower interest rate means a lower payment, and at least for now, we have the lowest payments in 30 years. But only those with good credit scores get the best interest rates, so right now the US, with Obama/Democratic leadership, has a great credit score, but going back to policies proven to fail could ruin our creditibility to pay back our debt and raise the interest rate for us, this would have terrible consequences. Putiing people into office that refuse to raise taxes or make meaningful spending reductions, is a bad idea. They have proven time and again that they cannot control the debt. They run up the debt only to give the rich a pay hike, and have no plan to pay it back. Who would loan money to people like this? The loan shark maybe who is going to charge a higher interest. What would you house payment look like if the interest rate doubled, or tripled? This is a quick way to economic ruin!!
Well, Doc...
... If only the government had spent our money sooner, this recession would've been over a long time ago. Why do we continue to doubt our federal government's ability to solve our problems?
that is exactly what it is
This is spin by a bunch of academics. Those of us in the real world are watching our jobs go away and quality of life decrease why the govt spends more and more money to "create and save jobs". That seems like a recession to me. Maybe the professors should be fired so they would understand--sorry they have lifelong tenure--unlike the rest of us in the real world.
Hmmm
For now, we'll take whatever bit of positive spin we can get.
"SPIN INDEED!"