Recession Journal VI: It's OVER!!!!!!!!!!!! Any Questions?

By Jabulani Leffall on 31 October 2009 (Updated 4 November 2009) 35 comments
Photo: bfick

Are people grabbing strangers in the street and kissing them yet?

Do you see the quivering, multi-colored ticker tape floating in the wind? How about the pitter-pat of feet toward the mall?

Are the talking heads flailing their arms with tales of you winning and the terrorists losing with your purchase of a new smart phone or a plasma television?

Are you happy now?

I ask these things because it’s finally over, technically, officially — the recession is over.

The latest U.S. Commerce Department figures reveal that America's economy grew at a 3.5% pace in the third quarter, beating economist expectations and turning in the best growth numbers in two years.

For any of those still feeling the personal blues and responding to this jargon with a resounding ‘whaaaaa,’ any positive gross domestic product growth after consecutive quarters of contraction or negative GDP, signals a technical, if not literal, end to the recession.

In this case, the latest GDP figures ended four straight quarters of negative GDP growth.

Indeed a relatively bullish equity market — with duller horns than recent years but still bullish — and respectably performing bond market, along with government stimuli and small surges in consumer cars and home purchases, is responsible for the growth.

So I’m checking in with you, how do you feel? Feel good? Okay, you sitting down?

Good.

Well here’s what our "post-recession" looks like right now.

In the same week that good GDP data pulled the United States out of a recession, there's also mixed to bad news where other economic indicators are concerned.

For one, consumer confidence is down.

I asked you how you were feeling, how come you didn’t tell me?

The so called "current conditions" indicator from the Conference Board, which was also recently released, fell to 20.7, and is near its lowest level in 26 years.

This is due to the continually lackluster labor market, where the current jobless rate of just under 10% — 9.8% to be exact — is the highest since 1983.

Okay I know that sucks, but are you comfortable?

Apropos, the ABC Consumer Comfort Index, also recently dropped on investors like it’s hot, indicates that consumers are as uncomfortable about current conditions and about spending as they were during peak levels in discomfort this summer.

And of course, we found out, in that same fateful week that consumer spending had nosedived in September by the largest amount in nine months. And incomes, to say nothing of disposable incomes, were flat across the board.

Still happy?

No, no, sit down, this’ll only take a bit longer. Cop a squat.

ARTICLE CONTINUES BELOW

Further — yes this came out the same exact week too — while the S&P/Case-Shiller home-price index climbed 1% from the prior month, seasonally adjusted, after a 1.2% increase in July, sales of new U.S. homes unexpectedly fell in September.

The fall of home sales points to fear about lingering foreclosures and the end of tax credits for home buyers that could hamper a housing industry recovery.

Speaking of foreclosures, the U.S. Census Bureau — yes recently they said this — the number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.4 million a year earlier.

Meanwhile durable goods orders are up, but continued high unemployment looms in the shadows, as does the potential for a wild correction in commercial real estate.

Additionally, buried in the basement of the Commerce Department's glowing is data that reveals the inflation-adjusted disposable personal income of consumers falling fell 3.4%, almost the same percentage of positive GDP growth.

Don’t get mad at me, I’m just being real.

Okay, put the torches and pitchforks down. I repeat, we are officially out of a recession folks.

But the long-term effects of new or amended spending habits, our country’s personal and government debt and how we respond now that we’re out, will determine our personal and collective future.

Do you plan to get out there and make something happen? Do you plan to wait until the coast is clear? How has your philosophy changed, if at all?

I know, I know, more questions but as Ken Mayland, president of ClearView Economics pointed out to me in a, to belabor the point, “recent” conversation, “questions are all we have in the present.”

And the more we ask of our government and ourselves where fiscal and personal decisions are concerned, the more answers we have.

This post was included in the Carnival of Money Hackers.

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Guest's picture
Guest

I personally think the market will collapse again soon, big time. But thanks, for a second there, it felt good to pretend.

Guest's picture
newsaddict

i guess you don't read the news everyday. have you read the friday news?

Guest's picture

Is that the light at the end of the tunnel or a near death experience?

I think you are right on. I don't think traditional economic indicators are going to mean a whole lot in what is hopefully a major shift in economic behavior on the part of the consumer.

When Real Estate collapsed and jobs disappeared and people came face to face with their spending habits and reliance on credit, thus their actual debt load, I think many big spending consumers took a hard look at their personal management systems and said"No More!" At least that's what I did, and many others that I have spoken with, as well.

Change is a messy business on any level, and it takes time. If the American consumer isn't going to spend the same way then business models have to change to adapt. I think this will be messy for awhile, but hopefully we will be healthy in the long run.

Guest's picture
newsaddict

One of the reason, the market swings up and down so fast is everyone assumes they are economists. There is no good mathematic formula for our current situation including how average people get their news and global changes in the globalization. Pull and push movements no longer matters or work in the global investment era. I hope there is no Depression down the line.

Guest's picture
newsaddict

I know the net advertising revenue is way down. It is easy to figure out by monitoring paper press, Google, and major broadcast stocks. I'm a bit tired of press constantly pushing their agendas to make this recession go away. This recession is NOTHING to do with the confidence. If people understand economics at all, Americans borrowed way too much their potential earnings. If you do the math, the stimulus has its limit. There is a reason more treasury notes have to be sold. These days, I rely more of my business information from NPR and PBS.

Guest's picture
Ron

More than half of that "growth" was due to cash for clunkers and the other half was government spending. We don't end recessions (or depressions) with government spending -- they end when private capital begins moving again. That's why this faux-recovery is just that -- fake.

With our bureaucrats racking up three times the debt this year than last, with the national debt surging higher and higher, with social programs and bills on the table that cost TRILLIONS of dollars, with no end in sight for the printing of more and more money, thinking the recession is over is a pipe dream.

To quote Dr. Ron Paul, “I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt (Obama and Biden?) caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954.”

Guest's picture
Gloria

No matter what the pundits spout, the recession is still going strong at my house and all indicators are pointing towards a continual decline. Recession over? Not a chance!

Guest's picture
newsaddict

Obama is a great president, but his staff can't do math. Many economists warned him. In order for the stimulus to work, they have to spend 4x to 8x more than the original amount or it would have been a complete waste. we will soon find out within few months. He also allowed dangerous risks to take place again. WallStreet minds are not designed to be ethical. Their jobs are to make money whatever it takes. You need hardcore ground rules, but it seems like they aren't going to get one. Ron is right about few things, but he is forgetting if they let the WallStreet goons take over, there will be more raping in the market. I don't believe in any party agendas, because they never worked. That is why I'm never voting again.

Guest's picture
deb

Obama is a great president???? ooh my

Guest's picture
pam munro

The American century was the 20th, not the 2lst. These are new realities - and to deny that is to incur much disappointment. There IS a very New World Order when China & India & such are major players - like it or NOT.

Guest's picture
Guest

The economic recovery is like a child in a play. The first couple days, the ticket sales are dismal, so the parent (govt) steps in and buys all the empty seats. "Wow the play must be excellent because all tickets sold out." So the play gets extended and the parents eventually run out of resources to pay for all the empty seats.

~the end~

Guest's picture
Chris

The "G" in the Gross Domestic Product has come to stand for government now. There was no private sector growth, only government spending.

Financial Samurai's picture

You guys can hate Wall St. all you want, but the stock market, and Wall St. pay are LEADING indicators for the economy.

$700,000 bonus/employee at Goldman Sachs anyone? That matches 2007 highs.

Good times are definitely back for some! Let's just hope it trickle down eventually for all.

Keigu,

Financial Samurai
"Slicing Through Money's Mysteries"

Guest's picture
newsaddict

"You guys can hate Wall St. all you want, but the stock market, and Wall St. pay are LEADING indicators for the economy."
Someone failed economics. Yea, finance guys really suck at economics. Nothing new to know.

Guest's picture

Well, wall street and the markets are in fact leading indicators since the market builds into its prices an expectation of what's going to happen. However, there's nothing that says this expectation is correct. So yes, they're leading indicators but they're not reliable ones.

Guest's picture

This:

"I ask these things because it’s finally over, technically, officially — the recession is over.

For any of those still feeling the personal blues and responding to this jargon with a resounding ‘whaaaaa,’ any positive gross domestic product growth after consecutive quarters of contraction or negative GDP, signals a technical, if not literal, end to the recession."

Is incorrect. The various definitions of a recessions used in popular media (such as two quarters of negative economic growth) are not what the US government uses. The correct definition of a recession is "any period of time which the NBER in retrospect declares is a recession". That's why it takes a while for the US government to declare whether or not we're in a recession even after GDP numbers are known.

The NBER users a variety of measures to see if we're in a recession, some of which incorporate GDP numbers while others don't.

In all other ways your article was spot on though. I just wanted to make sure people realize that since it explains the lag in government announcements versus GDP numbers.

Guest's picture
newsaddict

i love to laugh at people who constantly go GDP this GDP that without knowing what is actually going on right now. wiki does help. please look up "phantom GDP." This site really isn't good for any economic news. i'm here for the coupons and money saving tips.

Guest's picture
newsaddict

Before someone yell at me again. Do you know how GDP is measured? What if I told you, they are currently inaccurate? Lots of laws have been changed throughout the world and we still use the same method for many years. Many asset locations of globalizations aren't counted for in the USA. That means numbers are far less than you assume. I would like to learn about the money saving tips.

Guest's picture
Sarah

Forget the old definitions of a 'recession.'

In the old days, our economy was more-or-less like a big thermos bottle, where any economic activity was bound to reinforce the overall economy.

Globalisation has opened up the thermos, and if a company outsources a call center to Bangalore, it's glowing profit sheet is helping the Indian economy, NOT America's.

Today's corporate profits are largely due to cost cutting, such as reducing salary and/or benefits, and layoffs.

Reducing salaries, freezing pensions and cutting matches on 401k plans only prolongs a bad economy, or at best defers the effect until employees reach retirement age without enough savings.

America's roughly 10% unemployment rate hides the fact that many laid off people have taken new jobs with lower salaries and reduced benefits, if they have any benefits at all.

I'm not a "real" economist, but put aside all the grand theories for one moment, and ask this simple question: Do you think we would be in a recession if Americans could afford to pay their bills?

Guest's picture
Guest

yay! the recession is over! my bank account has instantly been filled and everyone who has lost a job has it back. also, all forclosed houses have been returned to their previous owners! yay! you are right...the recession is over! yay!

Guest's picture
A Nony Moose

This is the way I see it: My husband, who is 50 and was laid off in January 2009, is still not working. I work for a university in California and we have been told that layoffs will occur beginning January 2010. The recession over? I think not! The important question to ask is WHEN is the MEDIA going to start reporting the TRUTH? And, then of course, the follow up question is WHY is the MEDIA feeding us LIES? With the overall absolute ultimate question being WHERE are the new JOBS that were PROMISED?

Guest's picture
Guest

Over? How about just "really" beginning?

The DOW is falling again, after a short rally, and will only continue to fall.

More people continue to lose their jobs and those jobs aren't coming back. Unemployment benefits are already running out for many that were given extensions, and then what?

The good ol' American dollar is on the verge of collapse and the global community is looking for another alternative for a world currency. China is sick of us borrowing and not paying back. So major players are starting to dump the American dollar as the world reserve currency.

And our wonderful Federal Reserve keeps printing currency, when we no longer have the gold to back it up. Hyperinflation coming? I think it's what Zimbabwe did.

The cash for clunkers stimulus has created an even worse situation for the car dealerships, not to mention many who took the credit and are now in all kinds of new debt.

And remember the last time we got a stimulus check the gas prices went through the roof? We had to spend that money for gas!

I hate to sound like a messenger of death, but I'm trying to be realistic.

Guest's picture
Michele

Bush said 'Mission Accomplished'. Obama said, ' The recession is over'. Sorry, I don't believe either one. I'm still suffering and so are all my friends and family. The biggest employer in my community just laid off more workers and closed the resort lodge for the winter- a first. More businesses are closing. This is just an excuse to raise interest rates and screw over those of us who still have jobs, albeit with cut hours and benefits. Half my neighborhood is foreclosed homes,homes for sale or rent all standing empty. My son's college RAISED tuition in the worst economy since the Great Depression. Yah, the recession is over. If you believe that one, I've got ocean front property in Arizona to sell you.

Guest's picture
Alex

I think we have been here before....3 months ago, 6 months ago, 9 months ago, etc. It also seems that as soon as you read a post like this that in no time at all there is another article stating that the recession is here to stay. Not for the first time, I'm confused.

Guest's picture
Guest

It's over? Really? Where are the jobs?
I think it's just another smokescreen. There's more bad times coming.

Guest's picture

In reality, we are past depression which all economists do not wish to admit. All the signs are here: the unemployment rate is higher than is allowed to be known; giant bailouts for banks; Things clearly are not getting any better. But most people do not want to hear or know about the real state of affairs.

Guest's picture

California was listed as the 8th largest economy by the CIA World Factbook. When the state is looking at 12%+ unemployment numbers and realistically more under-employed workers, the US in total will have a hard time recovering...when unemployment disappears, then your real world recession will be over.

Guest's picture
newsaddict

A common most BASIC equation used to calculate GDP is as follows:
GDP=Consumption+Government Expenditures+Investment+(Exports-Imports

Our increase in GDP is Government Expenditure. Please check online for Consumer Consumption changes in the last two years. Also, check if you can FIND a good accurate data for globalization effect for (Exports-Imports). Also, don't forget. America is the mostly a SERVICE industry. We don't count R&D (Human brain assets).

The components used to calculate GDP include:
Personal Consumption:
-- Durable goods (items expected to last more than three years)
-- Nondurable goods (food and clothing)
-- Services (sold!)

Government Expenditures:
-- Defense (military)
-- Roads
-- Schools

Investment Spending:
-- Nonresidential (spending on plants and equipment), Residential (single-family and multi-family homes)
-- Business inventories

Net Exports:
-- Exports are added to GDP
-- Imports are deducted from GDP

Guest's picture

Even the government says with the recession technically over, there are still big problems, like unemployment, banks going broke every week, things like that.

John DeFlumeri Jr

Guest's picture
Amanda B.

Another financial institution dead.
Someone forgot to tell them about the recovery.
Another couple billion in bailout money we won't see again.
It's gonna be great when we're a third world country.
Keep drinking the koolaid sheeple.

Jabulani Leffall's picture

This is by far the most discourse I've ever had on any subject I've ever blolumned about. I love it.

First, I'm well aware of the NBER research numbers but the conventional wisdom, at least up until now, is that three consecutive quarters of negative GDP growth, constitute a recession and recessions are measured in retrospect, which is why economists had to look at 2007 quarters to determine the 2008 Recession.

But I did this recession journal series just to illustrate that recession is really just a buzzword and not an accurate depiction of us. Recession has become an excuse for underachievement and also for the vindication of previous irresponsible behavior on the part of business, government and the consumer.

Back to the recession being over, according to Economic jargon it's over. and once the very next quarter shows growth that recessionary period is over.

I'm not saying things don't suck because they do. And if not for the Social Safeguards that FDR put in place such as the FDIC, HUD, Social Security and the securities act of 1933, we might be eating catfood. The artificial o% interest rate from the FED, the cooked books of certain companies and the massive government intervention that saved banks' bacon are all things that if they weren't here it would be close to Thunderdome. But thank God those backstops are here.

Listen people,  Certainly CIT and all of the other key indicators I mentioned above are all factors, to say nothing of our attitudes.

From both a pundintry and personal perspective I'd like to see a wider benchmark to determine downturns and upturns and yes we need to get it together as a country, start working together, get out of Afghanistan and Iraq and start educating our children better, taking care of our elderly and underprivlidged and coming up with some Green initiatives and new manufacturing and service ideas to keep us from becoming Japan in the 90s, Us in the 30s or even worse, Germany in the 20s.

 

 

Jabulani Leffall

Monetary Gadfly, Common Currency

00000 Broke Blvd. Kitchenette #68 & 1/2

Lowcash, CA 90000-0000

Guest's picture
this article makes me laugh

growth ends when stimulus ends. how we used Keynesian theory is laughable now.it is clearly evident there are independent non-correlation between WAGES and consumptions! This relation isn't a confidence issue! It is the result of more money printing! I'm sorry, but you don't what you talking about.

Guest's picture
Thomas

The problem is debt and the solution isn't more debt.What is needed is debt reduction and cleansing.Banks should have been allowed to fail,bankers to jump.Those who were sensible could have bought assets on the cheap ,deflationary pressures would have reduced expenses of the general public putting more money into their hands.The government could have helped by reducing taxes and spending.They could have audited the Fed,deported Greenspan and Bernanke to Zimbabwe and closed it down.Instead they are putting on band aid when the patient is dying.

Guest's picture
Guest

I agree, but I think too many people are reading this word for word and not hearing the ironic tone this guy is taking with this stuff. My sense from reading this is that he doesn't believe the current system works or that the indicators tell us anything and that actually it is simply a matter of how we feel and that we might be making too much of a big deal of this recession. I think the author even commented to that effect.

Guest's picture
tony

recession over...lol..its growinG and will continue to grow coz asia is rising..look at china and india,thats where the money is..everyone has a job there and real estate is rising there like crazy...i think the only way america can get back to life is if they end all the wars immediately..cut there militiary budgets..and let other countries fight wit each other..which no country is doing right now..so the only way is to pray and wait for asia to collapse and than RECESSION will get over . MARK MY WORDS .