The Great Recession: Is It Over Yet?

iStock_000010253878XSmallEconomists say the Great Recession, the worst since the Depression, ended in 2009. Most Americans think it is still going on. Who’s right?

Alas, I’ll go with the popular vote that the Recession continues for most individuals and many businesses. A USA Today/Gallup poll in May found that 55% of Americans believe that the Recession has continued. And for many it has.

On the plus side, the financial markets, which had a major role in creating the 2008 downturn, have rebounded. The Dow has almost doubled since hitting its low in March 2009. Obviously that’s good for those who have ridden out the storm and remained in the market. But given the calamitous events of 2008 and the perception that the machinations and less than forthright gerrymandering by large financial institutions help cause the problems in the first place (which they did), many individuals pulled out of the market and placed their life earnings in less risky assets, with virtually no return. So far fewer have benefited from this upsurge than were hurt by the downturn.

In the business sector, there are some industries that have fared well. Interestingly marketing expenditures have rebounded and most ad spending segments have been healthy this year particularly new and emerging media (traditional print is still hurting however, and will continue to do so). But the overall feeling is that smart marketing with a focused ROI is part of the solution, not the problem.

On the negative side of the ledger, the bad news data is powerful:

1. Unemployment remains high at 9+%.

At this point in previous post-WWII recessions, the average unemployment rate was less than 7%.

2. Though overall inflation has been modest, two key cost factors for average Americans, gas and food, have risen.

As a result for most Americans, household expenses are rising faster than pay increases, which have been modest, if at all.

3. Under-employment is rampant.

For those working, many Americans work at lesser paying jobs than they previously had. This is a hidden fact in most unemployment data. Many Americans have lesser jobs, many part-time, than they previously held. And many of those in well-paid positions are holding on hoping not to be on the chopping block when the grip reaper of cost cutting appears.

4. Housing prices are still low and in some cases still declining.

Real estate was the key component of the Recession and still remains devastated in many areas throughout the U.S. with no appreciation in sight.

Overall, there is a greater frugality among the American public—I think that’s good. Since increased business and consumer spending fuels an economic rebound, slower spending will delay/moderate a rebound. Nonetheless smart, more frugal expenditures are wise in the longer term. Credit card spending is softer and that’s good too.  Obviously, the perception of increased wealth created by rising real estate prices last decade has been shattered. There is no more borrowing against inflated real estate values. On the whole spending within one’s means is always a good thing.

So when will the Recession really be over? I don’t think it’ll end with a rush, but rather a gradual inching up of economic conditions over several years. My hope for all is that the painful lessons of the past few years will shape our future behavior. Then again, I thought that 5-hour gasoline lines in the 70s would reshape our government priorities and gas consumption. We’re still working on that one too.

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