Friday, September 24, 2010

Economists Claim that Recession Ended in June 2009

(USA Today) A panel of prominent economists have declared Monday that The Great Recession ended more than a year ago in June 2009.  That's probably a surprise to 14.9 million unemployed Americans.  It surprises me.  I have a hard time believing spin regardless whether it comes from diehard Bushpots when Bush was president or those that are sympathetic to President Obama.  Prior to the mortgage meltdown revelation in September 2008, I used to hear radio talk show hosts Rush Limbaugh and Sean Hannity claim the economy was doing fine.  (They both were strong Bush supporters).  Since Obama has been taking office I've been hearing spin from Vice President Joe Biden, Obama's Press Secretary Robert Gibbs and other prominent Democrats that milions of jobs have been saved due to the passage of the stimulus bill in early 2009.  I have a difficult time in believing the news about the economy from some of these economists  I wonder if these economists are supporters of President Obama and the Democratic Party.  Both parties will place a nice spin on the economy when one of them holds the rein of power.  Both parties will point the fingers at each other when the economy isn't faring so well.  The information that I'm presenting is what I'm reading from the USA Today article on Tuesday, September 21, 2010. 

These economists claim that the economic downturn started in December 2007 and was the longest since World War II.  I don't have a difficult time believing that the economic downturn could've began somewhere during that time.  I'm going to quickly define the term recession.  A recession is two straight quarters or six months of decreased economic activity or two straight downturns on the GDP.  That's a simple definition of a recession.  I paid attention to the news at that time and I could sense the economy was starting to falter.  Gas prices were rising unrestrained.  The economists claim the recession lasted for 18 months and outlasted two 16-month recessions, in 1973-75 and 1981-82.  Niegel Gault, chief U.S. economist at IHS Global Insight, notes that economic output plunged 4.1% during the 2007-09 recession, the biggest postwar drop.  "Even though economists may say that the recession officially ended last year, obviously for the millions of people who are still out of work, people who have seen their home values decline, people who are struggling to pay the bills day to day, it's still very real for them," President Obama said. 

The National Bureau of Economic Research's Business Cycle Dating Committee, which issues the official word on the start and end of recessions, hastened to explain that it didn't mean "that economic conditions since June 2009 have been favorable or that the economy has turned to operating at normal capacity.  It meant only that the economy hit bottom and began a feeble and fragile recovery.  Nearly 7 million jobs vanished during the recession, and job losses continued for months afterward.  The jobless rate didn't peak at 10.1% until October 2009.  The committee withheld its decision until it saw the final version of key economic reports in July and August, then confirmed what most economists concluded months ago; that the recession ended in mid-2009.  Hearing the recession declared over is "going to irritate a lot of people," says Dan Seiver, finance professor at San Diego State University.  "When they say the recession ends, that doesn't mean everything is good again...Unemployment tends to be a lagging indicator."  Economists Kenneth Rogoff of Harvard University and Carmen Reinhart of the University of Maryland have found that recession triggered by financial crises tend to be the nastiest, marked by persistent joblessness and falling home prices.  They claim that this announcement means that any new downturn would mark the beginning of a new recession, not a continuation of the previous recession.

Many times when I read the news about the economy, I have to take it with a grain of smart.  I know there are those out in the media that will spin the economy favorable or unfavorable depending upon which party is in control in Washington and which political party they are sympathetic to.  One point I will bear out and that is the stock market on Wall Street can be boosting high numbers, but that doesn't mean the economy is doing well for the average American.  For those that work at our nation's capital, Wall Street, or those who head multi-national corporations, their economy is going great.  The sector that has had the greatest job growth within the last eighteen months has been the public sector.  Government has added all kinds of czars and bureaucrats to its payroll.  However, the private sector is limping slowly.  The Democrats in Washington refused to do what's necessary to help jump-start our economy: that is to renew the Bush tax cuts.  This is no time to to raise taxes.  The government needs to lower taxes on all Americans, businesses, and remove burdensome regulations that hinder businesses from growing.  With the passage of Obamacare in March, businesses will incur extra costs which hinder them from hiring new employees.  President Obama, the Democratic Party, and a group of elite economists can claim that our nation is out of a recession, but America's economy is hanging on a thread.  Millions of manufacturing jobs have been exported overseas the last sixteen years.  There won't be a true economic recovery until the private sector starts showing signs of steady growth once again and those that are presently unemployed will find new jobs.

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