RebelCapitalist: Financial Information for the Rest of Us

What Recovery!?!!

Sep 07, 2009 | By: Mr_Blue | Comments | Permalink | Tags: economic crisis

We are hearing, particularly from traditional media outlets and economists, of an economic recovery. This talk about a “recovery” is more academic and technical than real. Sure, most of the economic indicators are turning positive but how much of this is the result of huge amounts of federal government supports and money from the Federal Reserve Bank. The one true economic indicator that matters the most to an economy driven by consumer spending is EMPLOYMENT and those economic indicators are still very BAD.

A good place to start this discussion is with a few definition. Let’s start with a “Recession”. There is no set definition of a “Recession” but the following are pretty descriptive:

1) GDP (Gross Domestic Product) growth is negative for a period of two or more consecutive quarters.

or

2) The National Bureau of Economic Research (NBER) defines a recession as a “significant decline in economic activity lasting more than a few months.”

NBER determined that our current Great Recession began on December 2007 - this was when our economy began to contract (not grow). Some economist believe that this Great Recession will be the longest since World War II. Technically, we won’t know for sure for about a year when this current Great Recession will “officially” end.

The next definition is “Recovery” as in Economic Recovery. Broadly defined, an economic recovery is the period in a business cycle after a recession which is measured by positive growth in GDP. Again, we won’t know for sure when an economic recovery “officially” started for at least a year after the start. But who really cares because other thing truly matter.

Another term that we hear quite often in the media is “jobless recovery”. This term is an oxymoron - particularly in our current economic condition which includes high household debt levels. A better term may be “Economic Purgatory”.

This Purgatory is much different than in past (jobless) recoveries because of the level of destruction created by this Great Recession and what still remains of people’s personal finances. Here are just some of the effects of the Great Recession:

Total Jobs Lost during Great Recession: 6.9 million
Unemployment Rate: 9.7%
SHARE OF PEOPLE NEAR RETIREMENT AGE WITH A 401(K) BALANCE UNDER $40,000 IN 2007: 50%
5.8 million mortgage loans delinquent or in foreclosure process

These are just a few factors that show that we are FAR from an economic recovery that will be felt by MOST people.

Good luck.