CNN is excitedly telling the world that the "Great Recession" has finally ended. For those unable to click the link let me summarize. The National Bureau of Economic Research has declared that the economy has taken an upturn this summer after studying "employment, industrial production, income and sales" figures for the past few quarters. The article goes on to say that the NBER believes that any double-dip recession would actually be a new recession, not a continuation of "The Great Recession".
The recession is more than likely still not over. Lets look at employment figures, the current unemployment rate for the country is a 9.6%, which means the summer of recovery was able to do effectively nothing since the is essentially where we stood when the summer began. But lets look at this a little closer. In case you've never heard of it the U-6 is a statistic politicians try very hard to never mention in public. The U-6 is the actual measurement of employment in the US. The normal unemployment rate simply factors in those looking for work, not those that have plain given up on finding work or have a crappy part-time job that doesn't even come close to what they were doing before they lost there job. Like a software engineer working at Arby's.
Click this if you want to stay awake at night. According to the US department of Labor real unemployment is at 16.7%. That's are scary number. And they are the real numbers we should be looking at. While anyone can argue that there will always be a percentage of people not working, for whatever reason, it should never be that high. Not to mention the fact that this is an increase from last month.
So are we really out of a recession? With numbers like that it would appear not to be the case. This is just one subset of data that NBER uses to make their "end of the recession" calculation, but what about the others? The Bureau of Economic Analysis shows that second quarter GDP was 1.6%, that's a terrible number. Again going back to Econ 101 a healthy number is more like 3.3%, we're not even at half that for the quarter. It will be interesting to see what the third quarter report is when that comes out at the end of the month. But most likely with real unemployment still very very high, it probably won't be good.
Looking at personal income, the BEA has also shown that average personal income growth has only increased an anemic 1.0% across the country. Now yes some states have done better than others but on the whole that is a very poor showing. It's hard to read but that chart on the side is concerning quarterly average personal income growth starting from the third quarter of 2007. We still haven't even surpassed the numbers from when the recession supposedly began!
Bottom line, I don't think this recession has ended just yet. We have an unemployment rate that is actually increasing with more and more people become discouraged from working, or under employed. This doesn't even factor in all other problems associated with being unemployed such as increased debt, decreased savings, increase in bankruptcy (which is also on the rise). These are issues that will take an extremely long time to over come and can't even be dealt with until people are back to work. It may be good politics for Obama and the democrats to try and use the NBER's declaration that the recession is over and spin it to their advantage but there are still some serious issues with this economy that haven't been addressed yet. My guess is that we may be heading for another downturn in the economy. While it may be a slight down turn, I certainly doubt that we are out of the woods just yet.