The Recession That Will Never End, Even Though It Already Has

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Back in 2007, everybody seemed willing to believe the housing market, stock market, and economy as a whole would keep humming along uninterrupted for, well, forever. Now, few people seem to believe that the recession is over—even though it supposedly ended last summer.

President Obama, for one, said last week that the recession is something we still must struggle to climb out of—meaning the recession hasn’t ended or gone away—according to the NY Times:

“The tough measures that we took — measures that were necessary even though sometimes they were unpopular — have broken this slide and are helping us to climb out of this recession,” he said in a speech at a factory making battery components in North Carolina.

Note, however, that he seemed to believe the country remained in recession. It is virtually certain that is not accurate, as least as will be determined by the arbiters of recession at the National Bureau of Economic Research. “The recession is over,” one of those arbiters, Jeffrey Frankel of Harvard, wrote this week.

A WSJ story debating whether the recent downturn deserves the title “Great Recession” (the AP made it a proper noun a couple months back) says there is no doubt that, great or not, the recession is over:

The recent recession began in December 2007 and probably ended in June or July 2009. (The end to recession isn’t the victorious end to a football game. The date marks only the moment where things stop getting worse.) It lasted about 18 months, longer than any post-war recession. Industrial production fell 16%, far more than any recession since the Depression. Payrolls fell 6%, unrivaled by recessions of the past half century. Unemployment went from 4.4% to 10.1%, an increase bigger than the five-percentage-point climb in the early 1980s—though the jobless rate didn’t hit the 10.8% peak hit in 1982.

Those stats—and their long-lingering effects on consumer mentality and household personal finances—are the reasons that the average person doesn’t pay attention or care much to whether the recession is technically over or not. The “recession” has come to be popularly understood not in the way the term is strictly defined by economists, but in a vaguer, more touchy-feely sense. For most people, the recession will be over only when they feel safe financially, when they’re optimistic about things like the job and housing markets, and the future of their kids. And certainly, most people don’t feel like they—or we, as a nation—are in the clear.

That’s especially the case when you hear about projections like these cited in the NY Times piece:

In January of this year — after the recession had probably been over for at least a few months — the most optimistic member of the committee expected the unemployment rate to fall to 8.6 percent by late this year. The consensus was for a rate no lower than 9.5 percent.

The fact that the economy merely stopped getting worse doesn’t seem like reason to celebrate. Not when unemployment will be around 10% for quite some time. We’re not ready to exhale and head down to the mall. Or are we?

Sales of things like luxury goods and home furnishings were up sharply in March, and there’s even been a resurfacing of speculative house flippers. On the other hand, by this summer, there are expected to be five million underwater homeowners, who owe more on their mortgages than what their properties are worth, and who are probably considering strategic default as the smartest strategy to sidestepping their debt. And overall, fewer people think of homeownership as the rock-solid investment it was once considered.

So, if we’re defining “recession” in a broader way, do you feel like it’s over? Do you feel safe? Are you optimistic about employment, real estate, the viability of our country’s financial institutions, and all that important stuff?

For me, there’s an upside to not being optimistic. By expecting the worst from the economy, I’ve been able to hunker down, spend less, and save more than ever before. So I’ll probably be a pessimist for, well, forever.

Ten Good Things to Come out of the Great Recession
The Great Recession: Is ‘Great’ the Right Word?