Is the Recession Over Or Not?
There’s Fed Chair Ben Bernacke saying we’re past the recession. Meanwhile Treasury Secretary Timothy Geithner says that we’ve got a long way to go. They’re both right.
It all depends on what the meaning of the word “recession” is.
As usual Paul Krugman puts it clearly. The recession is over but there’s a shortfall of unused people and unused economic resources (shut down factories and unused equipment). It will take some time to get those people and equipment back into use.
Recession is basically defined as declining GDP. Yet most of use don’t mean that when we use the term. We mean that we know of too many people who lost their jobs, that we’re worried about our job, and that we see stores and businesses closing.
The economy has to keep expanding to keep us all growing economically. Some 50,000 jobs need to be created each month nationwide to maintain a normal job growth rate. Right now we’ve lost around 8% of GDP since late 2007/early 2008 when Bush was telling us we’re fine economically. We seem to be basically flat right now - neither growing nor shrinking much. We’re not technically in a recession. But we’ve got a lot of people, equipment, buildings, and factories either completely idle or underused. In the case of people, they’re either unemployed or we’ve got top chefs, accountants, and engineers making burgers.
It will take some time to grow our way back to “normal”. So the recession is over, but that doesn’t mean much for us day-to-day. There’s nothing wrong with the honest work of flipping burgers for those accountants and others above, but it would be better for the economy if highly trained people were working where they could use their training.
This isn’t just a US problem. The world shipping fleet is 12% unused. That rate used to be a around 0.1%. Consumer demand has dropped off a cliff and goods don’t need to be shipped from producers to consumers. Since jobs in one place are connected by shipping to purchases in other places then we’re all in this boat together.