The Recession is… Over?

According to an AP News report issued earlier this afternoon…

“Economic activity is stabilizing or improving in the vast majority of the country, according to a new government survey, adding to evidence that the worst recession since the 1930s is over.”

Apparently eleven of the Fed’s twelve regions have shown signs of economic stabilization. The lone outlier is the St. Louis region, in which the rate of decline in economic activity has decreased, but things are still in negative territory.

So, dear readers, what do you think? Are we on the road to recovery?

21 Responses to “The Recession is… Over?”

  1. Anonymous

    Whether or not the recession is over is, in my opinion, a secondary issue to the larger, 900 lbs gorilla issue that debates of this sort tend to gloss over. I will try to illustrate by investigating a Family’s economy. This is off the cuff so there will almost certainly be issues with complete applicability but hopefully it gets the idea across.

    Bob and Sue are a typical young couple in their late twenties. Bob is a teacher at the local High School and Sue works as an engineer. As far as they know, they are living reasonably within their means and they have never had a problem paying household bills, mortgage, car and credit card payments every month. They have been contributing some every month into 401(k)s and are, by all practical measures doing quite well. Life seems pretty good…

    Then comes the recession, er layoff. Due to a company reorganization, Sue’s department was eliminated so, overnight, the household income is cut by 65%. Suddenly, things don’t look so great. Even with unemployment, without Sue’s income, they won’t be able to cover everything so they start running up personal debt to cover the deficit.

    This goes on for 4 months when, thankfully, Sue gets another position, the panic passes and things return back to normal… or so they thought. Their personal debt has increased significantly. In fact, now that they can breathe and start looking at things, their personal debt has been increasing every time they wanted something or a bump comes up. The good news is, this last bump was a big one and, since it scared the bejesus out of them, they woke up and finally started paying attention… They got on a balanced budget, started paying debt and are a little more cautious with the finances before promising things to the kids.

    What would have happened to Bob and Sue’s future if, as a result of the layoff, they decided that the answer was to go out and get a HELOC instead of looking for gainful employment? They could live off the HELOC money for a long time right? Since the layoff was obviously difficult for the kids, it would only be responsible to console them with a Disney World Vacation right?

    Whether or not the recession is coming to a close now, our elected representatives have been trying to pass off a similar scenario to us for years. The real question is whether or not the latest bump in the road was enough for us to finally wake up, get on a reasonable budget and realize that all of us, as a nation, have credit card debit out the ying-yang, a balloon mortgage that is getting ready to pop and that we simply cannot afford to promise an endless supply of toys and vacations without the bill eventually coming due…

    Stated another way, are we, the American people, starting to come out of adolescence to become mature adults or are we still sitting in the back of the car crying for McDonalds! McDonalds! McDonalds! because we want yet another happy meal toy…

  2. Anonymous


    The news has to say this to keep the masses from panicking. Just look at what’s still going on: we’re still seeing record unemployment; foreclosures are still taking place; consumer spending and confidence are down. Show me some new jobs created, some houses kept from foreclosure, and consumer confidence on the rise.

    And they say the recession is over?

    And the band played on….

  3. Anonymous

    Technically, we will end the recession, but we have such structural problems that we might end up like Japan where we yo-you in and out of recessions. They have had 8 or 9 recessions since 1990. And, they have suffered massive deflation.

    We have the highest debt level in history. Our government, corporate and consumer debt is 3.5 times our GDP. Even during the Great Depression, we only reached 2.99 times GDP and that was because GDP dropped 20%.

    The Fed is the main culprit in our situation with easy money policies. Yet, how do they fix the problem…with easy money. This is like giving a fix to an addict. It feels good, but doesn’t solve the addiction. Between the Fed, FDIC and Treasury, the government has allocated $4.2 trillion since last September. The inflation adjusted cost for WWII was $3.6 Trillion. So we are obviously going to get an improvement when you throw that much cash at the situation. But, what happens if things fall apart after that? You can only continue spending money like that so long before faith in the US dollar collapses.

    It will be interesting to see when the Fed stops buying mortgage backed bonds in October coupled with the end of the first time homebuyer credit. Also, the Fed is suppose to stop its purchases of Treasuries then too. Could be a rough ride.

  4. Anonymous

    With all of the trillions the government has thrown at the economy, we should expect some sort of technical recovery, at least as far as the usual indicators will show.

    It probably won’t feel like a recovery for most of us. A jobless recovery is an oxymoron. No jobs=no money=no growth.

    Then we have to ask, “what are the drivers”, the sectors of the economy driving the growth? There aren’t any real ones. Anyone see any sweeping new technologies or industries on the near horizon? Something like IT in the 80s and 90s? These are the ventures that create the high paying jobs and investment opportunities that generate a real expansion.

    A recovery based on government budget expansion and growth in government employment is hollow. This was largely the phenomenon with the 02-07 expansion. It was weak and shallow, and accompanied by a continued decline in a large number of industries. All Fed money driving the “growth” with cheap money, and it set the table for what we’re in now.

    Since unemployment never went this high last time around, that downturn didn’t feel as bad. This time the UE rate is twice as high and growing. I wouldn’t be rushing to move my emergency fund into mutual funds any time soon.

  5. Anonymous

    #13 Courtney) it gets my goat when people like you spread the misconception that the “official” definition of a recession is two quarters of GDP decline (which it is NOT):

    In the real world, recessions are called by the National Bureau of Economic Research (NBER):

    “The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. For more information, see the latest announcement from the NBER’s Business Cycle Dating Committee, dated 12/01/08. ”

    Employment absolutely does factor into the “official” definition of a recession.

  6. Anonymous

    A rather cyincal point of view:

    With the vast majority of people (as well as commenters here) being extremely sceptical about the recession being over, I’m inclined to believe that it is. 🙂

  7. Anonymous

    BG – you can use whichever graph you like for the GDP. I’m just saying that a “recession” has a specific definition and it gets my goat when people say “We can’t be out of the recession yet, the stock market is still down 31% from its high and 1 in 10 people are unemployed!”

  8. Anonymous

    Courtney: If you want to use the “2-quarters GDP contraction” definition for recession, then lets be honest and use a “real” GDP figure that isn’t manipulated by the government:

    We have been in a ‘recession’ since mid-2004, if not for the little blip in 2004, we’ve been in a recession since 2000. The SGS-alternate line is calculated using the original GDP formulas in place pre-1984.

    Hell, if you go by the current GDP formulas, we didn’t even have a recession in 2001 — LOL

  9. Anonymous

    Jim @ 10 mostly got it. The definition of a recession is 2 quarters of GDP contraction, thus we can’t say when a recession starts until 6 months retrospectively. Likewise the definition of the recovery is two quarters of positive GDP growth. The unemployment rate, the stock market, interest rates, credit defaults and foreclosures all have as much to do with defining the boundaries of a recession as do unicorns and squirrel farts.

    The recession may be over (or ending). But we have a long way to go to get to a healthy economy.

  10. Anonymous

    Yes *technically* the recession is over. The recession is technically over when GDP becomes positive. I’m very certain that GDP will turn positive this quarter.

    Of course that doesn’t mean that everything is wonderful. Unemployment is still high and many people are underwater on their home mortgages. But as soon as the economy starts growing that should lead to improvement in the job market.

    Things are starting to turn around. But we aren’t out of the woods yet. And that all means nothing to individuals who are unemployed or otherwise struggling.

  11. Anonymous

    It has been said that economic forecasting only exists to make weather forecasting look credible. For what it’s worth, my personal opinion is that anyone’s claim that they can predict where the economy is going in the short term is on par with using dice, ouija boards, or I-Ching tosses and I have several reasons for this.

    The first, as David mentioned, is that a large portion of our GDP is based on Credit Backed consumer spending. The NY Times recently ran an article (link below) that consumer credit use is down $21 billion since June instead of the $4 billion drop that economists predicted. A large number of people have been snapped out of their financial slumber and have started waking up to the reality of their current financial state and have started correcting it via increased savings. Last reference I saw is that Average Savings has increased to 5.7% but I don’t have a reference handy. This is a great direction to move towards long term but will have short term economic impacts. Service and Repair operations will be up, new sales will be down and no one knows for certain how this shift will effect the economy in the short run.

    Also, as Bob mentioned, ARMs and other sub-prime mortgages (interest only, balloons, etc) are getting ready
    to pop unless some serious refinancing is done in short order. Given that credit is down and lenders are already swamped with the refinance requests that will only increase if people are paying attention, it is understandable that banks are failing. We aren’t seeing anywhere near the number of failures that we saw in the early 80s after the S&L idiocy but they are up. Again, not sure where this one is heading but it needs to be addressed before we regain a solid financial footing.

    The final reason lands solely in the political arena. Regardless of where an individual stands in the political spectrum, it is a fact that our current political climate is rife with economic uncertainty. We have passed massive legislative packages that have been extremely poorly executed and, just like any other source of uncertainty, this is only serving to increase perceived economic risk and the associated volatility that follows. President Bush bailed out poor management without any net benefit only to have President Obama stimulate poor management with equally dubious results. Only 5% of the funds have been spent which leaves a huge sum of taxpayer money floating around in limbo.

    Add to this the impact that newly proposed health care mandates will have on the small businesses who make up 90+ percent of the economy and who knows where things are going to land. The newly proposed health care legislation, as written, WILL increase overall costs. This is a reality. You can’t promise everything to everyone while maintaining oversight expenses and not expect to pay for it from somewhere. Much of the cost for this plan will land on small business and I would expect job losses to increase.

    The good news here is that regardless whether or not the economy is up, down or bouncing back and forth with extreme corrections and volatility, if your personal household controls expenses, has a decent nest egg and is willing to work diligently to avoid the silly mistakes that got us into this mess to begin with, you can not only weather most any economic storm but you will actually directly benefit the economy from a long term perspective.

    Just imagine what the economy would be like if the avg American family was producing more than they consume, saving 20% of its income so they could give 5% away to charity without fear while also being able to treat their employees, customers and neighbors with respect instead of milking them like a cow for every last dollar.

    At that point, we might be able to have actual communities again and, lets face it, very few people need to worry about tort reform when talking with friends at a BBQ…

    (NY Times article link:

  12. Anonymous

    Our economy is so intertwined that its almost a catch 22 we find ourselves in. Consumer spending can’t go up when people are still losing their jobs. While how are companies going to start hiring people if no one is spending any money, or has the money to spend. These stimulus packages are really just band-aids. We need to find a solution, and its going to have to be a slow one to work.

    Despite the gains in other areas of the economy, I don’t really think anything can get straightened out until we get employment back on track. It all starts there. I think the current administration is doing all it can do at this point, and a lot of the initiatives seem to be merely for show. They sound good, but have no lasting impact. There are no quick fixes to this thing, its just going to be a slow and gradual thing. It can’t go on forever, can it?

  13. Anonymous

    Recession is definitely over. My bus ride over to work was SO PACKED it was ridiculous! I’d actually venture to proclaim we’re in a bull market, except that i’ve sold most of all my equities in this rally. 🙂 Job market feels like it will be strong in 1H10 given companies generally tend ot over fire during downturns and scramble in the upswing.

  14. Anonymous

    How does anyone define “the beginning of the end” when they weren’t even sure we were in one (and had been for several months)?

    It would be politically expedient and beneficial for the recession to end prior to 2010. I expect the media will herald the recession’s end until it really does, giving credit to their party and man of choice.

  15. Anonymous

    Sure, it’s over, if you’re one of the anointed government-backed banker class making record bonuses. Unemployment is worse than ever, outstanding consumer credit has collapsed the worst since the depression (the “Great” one, I mean), commercial real estate has also collapsed, and foreclosures are only growing higher. The consumer credit number is frightening given that 70% of GDP is consumer spending. Wallets have clamped shut; those with good credit and no debt e.g. me refuse to borrow, and those with bad credit can’t. Gov’t debt is in the land of imaginary numbers. Not good.

    This stock market rally is based on fantasy; stratospheric p/e ratios only reinforce that notion. I’m sitting tight on my savings. At least I was only out of work for 4.5 months; my poor neighbor is coming up on 10 months and is about to lose her UI payments. so I count myself as very, very lucky.

    This thing has a long, cruel way to run, and it’s going to crush what’s left of the dwindling middle class in this country. The rich will make it, the poor… well, it’ll be same as it ever was.

    I get sooo angry at those who think this is all over.

  16. Anonymous

    “signs of stabilization”

    now what does that mean exactly. It could mean lots of things, and spun the right way it may even sound positive.

    But here is what it really means.

    The free fall has “temporarily” slowed, but has not stopped completely, and is not even close to beginning to rise, and when it does begin to rise it will take years to simply get to where we started falling from.

    The recession over? The recession hasn’t even hit full force yet, much less slowed down, stabilized, and begun climbing.

    Don’t let the Stock Market gains fool you into thinnking the worst is behind us. The manipulation is amazing, and it can fall faster than it rises. Remember last Fall? The market can give up all it’s “gains” in a few days. Wipe out half or more of your lifetime savings in a blink.

    Lots of people didn’t think that was possible last September. Then it happened. People panicked. Fear ruled. Then the market made a small comeback this spring. Makes up HALF it’s losses and peoples memories get cleared through the noise of the media and the government. Sucker rally. The pro’s will gladly take your money and get out before round two.

    Then a small snipped of reality hidden in the corner for those that pay attention.

    Headline news today…Treasury reports MILLIONS of HOUSEHOLDS will lose their homes to foreclosure in the next three years. More than 6 million homes.

    Average US home value of $225K equals 1.5 TRILLION dollars of homes.

    This has been coming for some time. I commented on it last year. ARM RESETS are coming starting in 2010. Lots of them. Second wave, bigger than the first, is on it’s way, with nothing to stop it.

    Of course this isn’t recent news. ARM resets and the coming wave have been know since early 2007-2008. Years ago. Google “OPTION ARM RESETS” and buckle in for the graphs.


  17. Anonymous

    I don’t think I would feel comfortable declaring an end to the recession until we have job growth. Last I heard we are still losing jobs: 9.7% unemployment and growing.

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