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Your Take: Are We Out Of The Recession?

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CNN Money GDP 2009Q3 ChartYesterday, the Department of Commerce reported that the annualized GDP (gross domestic product) grew to 3.5% in third quarter. This is significant because, by definition, a recession is two straight quarters of shrinking GDP. A 3.5% increase in GDP would mean, at least technically, the recession was over. Four straight quarters of negative GDP growth, the worst of which was the first quarter of 2009 (-6.4%), has finally come to an end.

Hooray! Right?

Unfortunately, no one living in the real world cares much for technicalities. Millions of jobs have been lost, with hundreds of thousands more each month, and so I don’t think many people feel like the recession is over even if the bean counters say so. One positive sign is that the growth beat expectations by 0.3%, which isn’t a bad thing.

Two things worry me:

  • How much of the recovery was the result of various government programs meant to stimulate consumption? We had all the bailouts, cash for clunkers, first time home buyer credit, and several other programs that cost billions. People are still being laid off at the rate of hundreds of thousands a month, unemployment for September 2009 was 9.5% (not seasonally adjusted), and people without jobs tend to spend less (duh). Is this sustainable?
  • Check out the 2nd quarter of 2008. In the 1st quarter of 2008, we saw a negative GDP growth figure. Then we “pulled out” of a potential recession in the 2nd quarter only to fall back into the trenches for a full year.

So, while we’re technically out of the recession, does it feel like we’re out of the recession? What do you think?

(Source: CNN Money)

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21 Responses to “Your Take: Are We Out Of The Recession?”

  1. zapeta says:

    The recession can’t truly end without some job growth. So we may be out of the recession technically but we will need jobs before there is any growth in the economy.

    • Jody Cahall says:

      The GDP is up only because Companies are laying off and consolidating. Who knows what coming out of washington, ive stopped investing in our country because I feel like im being punished for taking risk.

  2. Neil says:

    Job growth always trails gdp growth. This is because in a recession, despite all the layoffs, companies are still keeping the best people on even if they’re not working at maximum productivity. So as the economy recovers, those still employed get busier before companies start hiring again.

    One quarter of GDP growth does not form a trend, but if the growth continues the job growth will necessarily follow.

    Personally, I’m definitely feeling out of the recession. While I’m still employed I’m underpaid and not using my skills to their fullest extent. So I’ve been job hunting for pretty much an entire year – usually lucky to find one posting worth applying for every month. I’ve had 6 in the past two weeks. Just one field in one region, but that’s certainly good news for everyone.

  3. Bill says:

    As far as how much the governments intervention helped or hurt, it is not really knowable it is all opinion and everyone’s got one.

    At my company sales are up but they wont hire anyone. We are way under staffed after the layoffs last summer and management will only authorize temps. I think they are scared that things will go south again. If we can make it to the end of the year and sales are still strong, I think we will start hiring.

    Three people I know that got laid off this summer have all got jobs in the last 3 weeks, so some companies have started hiring again. One of the guys a business analyst got offers from 2 companies the same week after 4 months of nothing.

  4. TJSmith says:

    I have kept my job and am blessed with lots of overtime to help me climb out of debt, but I don’t know how you have recovery without jobs and without changing the basic way we drive our economy. I hope, for the sake of the people themselves, that we have changed our spending habits and are returning to a less wasteful, more savings oriented lifestyle as a result of all this knowing that if we do, the economy will continue to struggle the kind of transition.Change is hard.

  5. Eric says:

    I think it’s worth noting that the GDP changes reflected in that graph (-6.4% in Q1, 3.5% in Q3) are ANNUALIZED percentage changes. Actual GDP did not grow by 3.5%, it just grew at an annualized rate of 3.5%. Your post did not make that clear.

    Also, I think that the recession might technically be over (or at least getting there), but I still think it will be quite a while before it feels like it. I think the economy is still very fragile, and depending on monetary policy and many macroeconomic factors, we could easily slip into another recession.

    Interest rates are still ridiculously low, the dollar is weakening daily, the money supply has been growing rapidly, and it will be a very delicate process in raising interest rates to healthy levels without spurning another recession.

    The housing market is still in dire straits, and a crisis in commercial real estate has been beginning for some time now.

    I’m extremely pessimistic – yet I hope I am wrong. I think “technically” we may be out of the recession as the economy will begin to grow, but it will simply be a technicality for most families, as they will continue to struggle.

  6. FFB says:

    It looks like we’re seeing some growth and technically we may be out of a recession, but I don’t think many people will feel that way until unemployment starts to return back into the single digits.

    Just because the economy is starting to grow doesn’t mean companies will rush out to hire all those they laid off. In fact some companies may be finding they can do without many of the extra people. But as the economy continues to recover (I’m being optimistic here) new businesses will emerge that need employees.

  7. eric says:

    Technically–maybe? Emotionally–I think not yet. It’ll take awhile for people to become optimistic again.

  8. Technically we could be out of it. But it is not an economic recovery. The way that GDP is calculated is rather ridiculous. I believe, the massive inflation of the monetary supply is what has caused our GDP to jump.

    If you believe in Austrian Economics this will make things in the longer term much worse.

  9. Rick Morley says:

    To answer Jim’s question, I read that 1.7% of the 3.5% growth last quarter was from the auto industry — which was stimulated by the cash for clunkers program. My opinion is that nearly all of the growth we saw was stimulated by government programs.

    Of course, there are those that would claim that this is just proof that these government programs were successful. Of course, they must have forgotten to check the current national debt.

  10. Jim says:

    The recession is over.

  11. Steven says:

    The first step towards recovery is to increase the GDP, and that means people MUST spend. Someone HAS to do it. Someone must buy, otherwise goods/services are not sold.

    It’s simple economics. When a business has high supply and low demand, they will lower prices to try to increase demand, but you can only lower prices so far to stay in business. At that point, businesses have to lower overhead to further reduce expenses, and that means layoffs/salary cuts.

    As supply dwindles, the company will produce a little to replace SOME of the goods sold but not all with the skeleton crew left. If the company sees that demand grows above the supply, that is when they will hire people again to produce more goods to keep up with demand.

    Essentially, the stimulus package is ther to stimulate demand. By artificially increasing demand to get people spending at a level where economic growth can be self-sustaining once again.

    This is not to say you should go all out and go out on a shopping spree to “do your part”. You should never spend more than you make, EVER. But, this also means that you shouldn’t be hoarding money. By hoarding money, and not spending it, the economy is being artificially stagnated.

  12. I saw someone ordering a bottle of Crystal to celebrate yesterday night at a restaurant.

    Definitely maybe!

  13. Wil says:

    The “cash for clunkers” and other programs made the number look better than they actually were, in my opinion. However, perception is reality in economics…

    • zapeta says:

      I don’t think most people perceive the recession to be over…weak consumer spending caused the stock market to lose 2.50% today. If people think the economy is weak they won’t be increasing their spending.

  14. lostAnnfound says:

    “Technically–maybe? Emotionally–I think not yet”

    I agree with Eric. On paper it may show that we are at the start of a recovery, but it doesn’t “feel” like it. I’m not ready to spend unless it is to buy something that we NEED, not necessarily want.

  15. Things seem to be looking up, but I think that a lot of people are still feeling very cautious.

  16. reinkefj says:

    I’d point out that the weak dollar should influence our judgments. If the stock market goes up 50% but the dollar goes down 50% versus gold, the Euro, or some other “standard”, then did the market go up at all? Like fish in a tank, we can’t sense anything but water. Bad metaphor, can’t think of a good one. It’s like a football team gaining ground but the “year” gets redefined as the game proceeds. IT feels like we are losing ground on a “financial treadmill”. AND, give the gooferment’s tendency to make stuff up (i.e., jobs “saved” or “created”), especially if it’s a nebulously defined concept, I’m cynical about being “out of the recession”. The Titanic had its ice deliver but didn’t sink right away. Maybe we’re seeing the same thing. All that printing press money has to come home to roost.

  17. Harry Taylor says:

    NOT OVER!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  18. Anonymous says:

    It took us years to get into a recession it will take us as many to get out. Scary but it’s reality.


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