Home > Disruptive Change > The RECESSION: Is it over yet?

The RECESSION: Is it over yet?

The Recession: Is it over yet? It’s the question many people have been eagerly (and desperately) waiting to have answered since the bottom fell out of the housing market sending the U.S. economy into a tailspin and shaking the national spirit. In the past three years, each small glimmer of hope has been quickly dashed by a jump in the national unemployment rate or plummeting housing prices. But it seems that recently, there has been some good news. Well, sort of.

Last fall, The National Bureau of Economic Research issued a statement announcing the end of the recession. The NBER has long been considered one of the strongest voices on matters such as widespread financial crises. According to AOL’s Daily Finance report in September of 2010, the NBER’s Business Cycle Dating Committee said it “determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II.”

Well it’s great that economists have data showing that our recession ended over a year ago. But what does everyone else think? Is the economy really is recovering?

There are several indicators that the U.S. recovery has indeed started and will continue. According to articles by Rick Newman in U.S. News & World Report (December 15, 2010 and December 28, 2010) there are lots of positives: 80 percent of U.S. corporations had higher-than-expected earnings in 2010; the S&P 500 index rose by about 13 percent in 2010 and that came after a 23 percent gain in 2009; the private sector added 1.2 million jobs in 2010; and U.S. exports are increasing which are helping to prop up jobs and revenue.

And there has been even more good news recently. As reported by Alex Kinsbury in the March 11, 2011 U.S. News Weekly: “The latest data from the Bureau of Labor Statistics show that the country’s unemployment rate has fallen below 9 percent for the first time since April 2009.”

But not everyone is optimistic. Even Kinsbury goes on to remind us that: “There are currently some 14 million unemployed and more than 11 million who either are underemployed or have ceased their search for gainful employment.” And those critical of calling the financial crisis over say there still could be a “double-dip” recession looming on the horizon.

In a Dec. 1 2010 piece in Bloomberg Businessweek, Bill Varner reported on the United Nations analysis of the global economy. This report called the U.S. recovery fragile and suggested that without more Federal stimulus money geared to job creation, the U.S. economy could still fall victim to a growing unemployment rate and that, coupled with possible recessions in Europe and Japan, could stall an already weak recovery.

So what really determines whether or not people believe that the recession is over? The unemployment rate still is expected to hover around 9 percent for at least the next year, and housing prices are expected to continue to fall in most major U.S. cities for the next 12 months, according to David Streitfeld in the January 25 edition of The New York Times. So, while economists may consider the recession to be finished, unemployment and the housing market may be better indicators of how the average American answers the question: Is it over?

But regardless of whether the recession is officially over, it appears that consumers have adopted significant changes in their spending habits. One clear example of this was seen in the recent holiday shopping season when shoppers were more likely to make purchases with cash, rather than credit.

“Cash is the route I’m taking this year, from past experiences with credit cards and being in debt and trying to pay it off for so many years,” said Liz Gonzalez, a community-college employee in Signal Hill, Calif., in a December 9, 2010 report in The New York Times.  Gonzalez seems to be part of a growing norm, rather than an exception.

And what about the astronomical rise in gas prices at the pump due to the dramatic chain of events in the Arab world? How will consumers react to this unexpected burden? And just as important, how will businesses that are already struggling for stability cope? In the March 3, 2011 issue of the Economist it is stated explicitly that the price of oil is more of a threat to the world economy than investors seem to think.

As summarized in the article by Newman, “Every quarter without another collapse in the financial market, puts the U.S. economy further down the road toward recovery, and every month without a crisis means that Americans pay off a little more debt, companies get a little more efficient, and the recovery gathers a little more steam.”

So now we have a building global crisis revolving around oil.  And if that isn’t enough, there is the earthquake and tsunami disaster in Japan which clearly will have global economic impact. So is it over, or will our fragile recovery be stalled? In any case, business survival, stability, and growth will continue to be a challenge.

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Categories: Disruptive Change
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