According to the National Bureau of Economic Research, the recession has been over since June 2009. I guess the rest of us are just living in a dream world where jobs are being lost day after day and the cost of everything is rising. Maybe it is only a matter of time when everything will be back to normal, but one can never be too sure.
NBER states in their report that just because the recession is over does not mean things are back to normal. One point they make is that economy stopped contracting and expansion began. National Bureau of Economic Research defines recession as “a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
Their definition seems to conflict with their own report. How can there be recovery if there is such high unemployment rate still? One wonders about the authenticity of such claims.
Technical terms versus the real world
By their own definition of what a recession is, it would seem that they are contradicting themselves with the report of economic recovery. One of the main reasons is due to high rates of unemployment in the United States. According to the U.S. Bureau of Labor Statistics, the average unemployment rate is currently at 9.6 percent! At the time recession began, the national average rate of unemployment was merely 4.8 percent. Just at the beginning of 2010 it reached 10.6 percent. Some of the harder hit areas must be experiencing jobless rates of epic proportions.
After looking at publicly available data, how can there be a report stating that the economic recession is over? One can only wonder. There is one major reason such reports could be coming out and being publicized.
Self fulfilling prophecy
Have you ever wondered why every President wants people to believe that the economy is doing great and that a massive number of new jobs have been created? It is due to what is known as the self fulfilling prophecy. If people do not believe that our economy is getting back on track, they will keep hoarding money and not do any hiring. This leads to the economy getting worse and leading to many problems. Even if things look bleak, it is in the best interest of our country’s leaders to keep pointing out how great things are going.
What the general public wants to see is data on jobs. Despite how the economy is doing, it does no good to people if there is a lack of jobs. What such reports as the one from National Bureau of Economic Research do is keep people’s hopes up. If the economy has started expanding again, jobs will eventually follow in due time.
One question to ask here is, if we are on our way back to recovery, why have we kept losing so many jobs ever since June of 2009? Almost everyday there are conflicting reports in the news about what is happening. One day you might the headlines stating how jobless rate has gone down; the next day the same source might report that the highest number of people have applied for jobless claims.
It is a roller coaster of emotions and reports. The bottom line is, nobody really knows what is happening. Only thing we can hint at is that the economy is not as bad as it was two years ago. There is still a lot of uncertainty and people do not know how to react. Unless we keep witnessing positive results month after month, we will be skeptical of such reports.
Well they lie and they steal. Who knows, they may have been paid to make that report to make a few stocks go up.
First, I think the economic crisis is far from over and as much as the government in the US or Greece, Spain, France, England and the rest of Europe want to put a positive spin on it, it will last for years not months. In effect nothing has changed. The banking system is still bankrupt and the people who got it that way are still in charge (and getting well paid not to mention starting to give themselves big bonuses again).
The real problem is the lack of finance available to small business. No, not lack of, the complete absence of finance for this sector of the economy that could employ all of the unemployed if it could get up a head of steam. (That is not be a technical term but I am sure you know what I mean).
Secondly, big business and government departments are far too slow to pay their bills and a many a good business goes broke waiting to be paid what they are owed. So combine the lack of finance to get them through the waiting period with the fact that the big boys protect their balance sheet at the expense of the little guy by not paying their bills and you can see why so many self employed or small businesses just give up and only do what they themselves can do with the minimum number of staff (if any).
I wrote a post about this topic recently at http://www.ricvatner.com.au/2010/05/slow-business-to-business-payments-pose-a-threat-to-economic-recovery/
Thanks for your article.