News

The Recession Ended… in September

Says who: U.S. Commerce Secretary Gary Locke, as the department reported a 3.5 percent growth in the GDP in the third quarter following six quarters of decline.

“Today’s numbers indicate that the tough decisions this administration made to rescue the economy from the abyss were correct. We’re headed in the right direction, and even though there are still too many Americans out of work and still much work to be done, without the action taken in the early days of this administration, the pain families are feeling today would be much worse.” (Commerce Department press release)

Why it might be false: Sustainable recovery means indicators are turning around, but widespread forecasts for rising unemployment, ongoing woes in the financial services sector and questionable consumer confidence all throw doubt on the idea of recovery. Unemployment isn’t expected to peak until next summer. GMAC Financial Services is in its third round of bailout talks; Citibank’s long-term health is still under question; and CIT just filed for bankruptcy. When the Consumer Confidence Index sank to its lowest reading since May to 47.7 in October, stocks followed. Sustainable recovery? Doesn’t sound anything like it.

Why it might be true: GDP grew by 3.5% so quantitatively the numbers have clearly pointed to recovery. Some pockets of the economy like Walmart.com, Facebook and Kiva.org are hiring. Recently, Google’s Eric Schmidt has said he sees business conditions improving. In another Conference Board report, U.S. leading economic indicators rose 1% in September. It was the sixth straight increase and strongly pointed to recovery.

Our call: The macro recovery is just that, macro. Even though GDP grew by 3.5%, what does that really mean in our day-to-day lives? Average Americans across the country probably don’t feel 3.5% more secure about their jobs, 401Ks or mortgages. Even though some pockets of the economy are experiencing growth, they are also just that, pockets of growth that only a small minority will benefit from. Until we’re over staycations, coupon clipping and cheap treats, it’s going to be hard to feel like we’re in a recovery, much less a sustainable one. That said, since growth is better than contraction, we can say that we’re moving in the right direction, but we’re a long way off from real recovery.

Tags: economy, recession, recovery, The Recession Will End...