Recession Over, Not Its Misery

Call it an economic hangover, but the fragile U.S. economy is not recovering with any great speed. Sure, some life signs are apparent, but the patients – consumers, taxpayers and, most of all, the unemployed – are far from out of danger.

The National Bureau of Economic Research, a panel of academic economists based in cerebral Cambridge, MA., recently declared the recession that began in December 2007 ended in June 2009.

To make its determination, the nonprofit NBER looked at figures that make up the nation's gross domestic product, which measures the total value of goods and services produced within the United States. It also reviews incomes, employment and industrial activity.

The national economy started growing again in the July-to-September quarter of 2009, after a record four straight quarters of declines. The recession was the longest and arguably the most severe America has seen since the Great Depression of the 1930s.

Thus, the April-to-June quarter of 2009 marked the last quarter when the economy was shrinking. At that time, it contracted 0.7 percent, after suffering through much deeper declines. That factored into NBER's decision to pinpoint the end of the recession in June 2009.

Assuming the NBER is correct about the recession’s end, then the economy lost 7.3 million jobs during the 2007-09 slide — the most in the post-World War II period. Nearly 15 million Americans remain unemployed because of the Great Recession.

Any future downturn in the economy would now mark the start of a new recession, not the continuation of the December 2007 recession, NBER says. That's important because if the economy starts shrinking again, it could mark the onset of a "double-dip" recession. For many economists, the last time that happened was in 1981-82.

We at WMB, however, see a double-dip recession as a very real possibility since we’re not convinced the recession, technical definitions and politics aside, is really over in America. Just look at the mounting evidence:

•Unemployment rose in 27 states in August, more than half of all states, with the highest rates in Nevada, Michigan and California, according to CNNMoney.com.

Nevada boasts the dubious honor of having the highest rate, with 14.4 percent looking for work, according to mediabistro.com. That's up slightly from July when the Silver State had a 14.3 percent unemployment rate. The lowest unemployment rate came from North Dakota, which was an enviable 3.7 percent. South Dakota (4.5 percent) and Nebraska (4.6 percent) also had rates below 5 percent.

•Builders are struggling with weak demand for new homes caused by high unemployment and a glut of foreclosed homes on the market. They benefited in the spring from federal tax credits, but those expired in April, according to the Associated Press.

Paul Dales, U.S. economist with Capital Economics, says the high number of vacant homes, mounting expectations of renewed price falls and economic constraints on households will continue to weigh on the industry.

"Homebuilding activity remains at an astoundingly weak level," Dales says, adding that construction has to be more than double current levels for the market to be considered healthy.

Building permit applications, a sign of future activity, grew by nearly 2 percent to an annual rate of 569,000. Home construction increased in August and applications for building permits also grew. The gains were driven mainly by apartment and condominium construction, not the much larger single-family homes sector.

Housing starts are up 25 percent from their bottom in April 2009. But they remain 74 percent below their peak in January 2006. Single-family housing starts are up 11 percent from their low point in January 2009, but down 78 percent from their peak in January 2006.

Construction activity rose 34 percent in the West and was up 22 percent in the Midwest and 7 percent in the South. But construction fell by 24 percent in the Northeast, the AP reports.

•Employment in private-sector industries, including wholesale trade, transportation and warehousing, information, financial activities, and leisure and hospitality, showed little change in August, according to the U.S. Bureau of Labor Statistics.


Still, it’s not all bad news because total private employment continued to trend up modestly over the month (+67,000), the bureau says.

In August, employment in health care (part of education and health services) increased by 28,000, with the largest gains occurring in ambulatory health care services (+17,000) and hospitals (+9,000).

Mining employment rose by 8,000 in August. Since a recent low in October 2009, employment in the industry has increased by 72,000.

Manufacturing employment declined by 27,000 over the month. A decline in motor vehicles and parts (22,000) offset a gain of similar magnitude in July as the industry departed somewhat from its usual layoff and recall pattern for annual retooling.

Within professional and business services, employment in temporary help services was up by 17,000. This industry has added 392,000 jobs since a recent employment low in September 2009.

In August, construction employment was up (+19,000). This change partially reflected the return to payrolls of 10,000 workers who were on strike in July.

We at WMB believe these numbers all add up to one thing: Our nation is scoring high on the misery index. Let’s face it, those with jobs fear for their security, see the need to save more and are loathe to spend even when the expenditure can be justified. The unemployed and under-employed just want a fair shot at improving their lots.

Until confidence is restored in our financial systems, there can be no peace of mind for anyone, whether you’re Bill Gates or John Q. Public. Listen up Dems, GOP and Tea Party folks, the man and woman on the street believe this: Health care reform is no substitute for having a decent-paying job!

An NBER researcher told the New York Times' Economix blog that "the amount of unemployment we've already got and the slowness of recovery lead to predictions that we could have 9-plus percent unemployment even through the next presidential election (in 2012)."

As it was when
Bill Clinton (far right) beat George H. W. Bush for president in 1992, it’s the economy, stupid. Address the No. 1 wallet issue (jobs) and the rest takes care of itself; it always does, a lesson worth remembering if the aim is to speed our recovery.

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