Recession's End Won't Stop Job Loss Pain

(AP)  It's about to become official: The recession is over - but not the pain.

The government will release figures this week expected to show that the economy has awakened from its deepest slump since the 1930s and is in the early stages of a recovery. But the following week, the government will issue another set of figures expected to show unemployment continuing to rise toward and possibly above a clearly recessionary 10 percent.

How can both be possible?

The government releases third-quarter Gross Domestic Product figures on Thursday. Many forecasters say they will show GDP growing at an annual rate of about 3 percent, validating a widely held belief among economists that the recession ended in June or July.

But try telling that to the more than 15 million still unemployed, the small businesses and individuals who can't get loans and the people whose homes are worth less than their mortgages.

Assertions by government and private economists that the recession is over - issued amid graphic examples of continuing wide distress - are raising fresh questions about economic scorekeeping.

The national recession may be technically over, but the state of the economy remains in the eyes of the beholder.

Or, as Ronald Reagan liked to say, a recession is when your neighbor loses his or her job. Depression is when you lose yours.

A survey of economic forecasters prepared by Blue Chip Economic Indicators, a research organization, predicted GDP growth to remain positive in each quarter through the end of 2010. In a survey by the National Association of Business Economics, 34 of 43 economists polled said the recession is over.

"From a technical perspective, the recession is very likely over," said Federal Reserve Chairman Ben Bernanke.

"A recession that showed no signs of ending last January appears to be firmly entering the recovery phase," said Christina Romer, the chair of the White House Council of Economic Advisers.

But nobody is sugar coating the statistics, especially in the administration, which agrees with private surveys suggesting that unemployment will hover near 10 percent through most of next year.

"Even when you've turned the corner, you have so much work to do," Romer told Congress' Joint Economics Committee.

And while she credited much of the turnabout to government stimulus measures and moves by the Fed, she said "by mid-2010, fiscal stimulus will be contributing little to further growth."

The economy has lost 7.2 million jobs since the recession began in December 2007, 3.4 million of them since President Barack Obama took office in January.

James K. Galbraith, an economist at the University of Texas at Austin, suggests too much attention is given to when recessions technically begin and not enough to other measures of the economy.

"It's just a word. A recession technically lasts during negative quarters. But that doesn't mean you're back to prosperity once you have positive growth. You're back to prosperity when the unemployment rate is back around 4 percent," Galbraith said. And that, he said, could take years.

A recession is popularly defined as two or more consecutive quarters of negative economic growth, or declining output.

But a more refined determination is made by the National Bureau of Economic Research, a private group of leading economists charged with dating the start and end of economic downturns. It not only looks at GDP but at employment levels, real personal income, industrial production and wholesale and retail sales.

It put the start date at December 2007 and has not yet called an end.

There have been 11 recessions since World War II. In the two most recent ones, job growth lagged long after the recessions were deemed over. In the most recent two - July 1990-March 1991 and March-November 2001 - the unemployment rate did not fall to prerecession levels for several years.

After the eight-month 2001 recession, the unemployment rate went from a prerecession 4 percent in 2000 to 4.8 percent in 2001. Then it kept climbing even higher - to 5.8 percent in 2002 to 6 percent in 2003. It didn't return to under 5 percent until 2006, when it fell to 4.6 percent.

While there are clear signs of recovery, it is uneven.

Stocks have surged about 50 percent since their March lows. And a year after Washington rescued the financial industry, some large banks and Wall Street firms have roared back to profitability.

But smaller banks and other businesses are struggling, and many have failed or are failing.

That disconnect sparked anger among the public and led to sweeping government action last week to limit executive compensation at financial firms that accepted federal bailout money.

"While credit may be more available for large businesses, too many small business owners are still struggling to get the credit they need," Mr. Obama said in his weekly radio and Internet address. "These are the very taxpayers who stood by America's banks in a crisis - and now it's time for our banks to stand by creditworthy small businesses, and make the loans they need to open their doors, grow their operations and create new jobs."

There have been modest improvements in manufacturing and other parts of the nonfinancial business sector, yet lingering signs of weakness in commercial real estate and retail spending.

Economists suggest some of the expected increase in economic growth is a bounce off the bottom. They attribute it to government stimulus spending, including the now-expired Cash for Clunkers program; accommodative Fed monetary policies and widespread cost-cutting by companies.

Many companies let inventories run down so much that when they ran out, orders picked up. Home resales ticked up as buyers scrambled to complete their purchases before a tax credit for first-time owners expires. And U.S. exporters have benefited from a relentless decline of the dollar that has made U.S. goods cheaper and more competitive overseas.

But none of this adds up to a sustainable upswing.

"Absent robust job growth, it is not a true economic recovery," said White House economic adviser Jared Bernstein.

[n6532l]

Free trade breaks the relationship between GDP and the welfare of the people. With free trade real wages of Americans can decline while the GDP goes up.

Suppose there is a small manufacturing company with a few hundred workers and direct management on the production floor. Production is ramped up to build inventory. All the production workers including management are fired and the machinery is dismantled and shipped overseas. Customers are supplied from inventory until outsourced production is available. Fired workers who once had middle class factory jobs with benefits get MacJobs without.

How does this impact US gross products?

Company production is still sold and contributes to GDP. The selling price should remain the same at least in the short term. In general the firm is a price taker not a price setter. The market sets the price. True costs are down but there is no need to share with the customer. If the price was lowered competitors would match it even if that meant they must also shift to outsourcing. Before production wages and profit entered into the GDP now it is just profit which is larger by the difference wages here and offshore and some of the transportation costs. Former workers are paid less but it is still more than wages paid overseas and the additional transportation costs. The company?s contribution to GDP is a little less than before but it is more than made up for by the wages of the former workers.

In other words the outsourcing increased GDP. If that is all you looked at the transaction must be viewed as a good thing and your Congressman should help outsourcing. But is it? A few hundred workers are deprived of good jobs and the nation has a declining standard of living.

[wheresmyjob]

Will it take a 3rd political party to address the underlying cause of this mess? Democrats blame Republicans, and Republicans blame Democrats...Neither party is talking about changing foreign trade policy to bring BACK JOBS. WE HAVE TO HAVE A JOB TO SPEND MONEY YOU IDIOTS. We can't all work on wall street. Protectionism is NOT a dirty word! It is what built the industrial base of this country in the first place. Free trade has broken the back of the working man and simultaneously made the very rich.... very richer. Thanks a lot goofballs! Do something about it before the masses find their pitchforks and torches!

[liltiger101]

I think the IDOTS will be waking up soon. Like I said the unemployed will not be paying much if any taxes for 2009. That should kick both parties in the head/wallet pretty hard!

[liltiger101]

Guess when everyone files their 2009 Income Tax Obama will know the United States is STILL IN A RECESSION. Congress won't be getting paid this time around with Unemployment being in what a
S T A T E O F E M E R G E N C Y.

[lmartink]

Current unemployment in this country is a combination of two things. The current recession; and a devastating culimination of 30 years worth of job exports to China, India, and a Baker's Dozen other countries. Those jobs are not coming back, but only a few of us protested and said it didn't make sense. Unfortunately, we were right.

[TheStolenGiraffe]

granted, its a fact that the unemployment rate is a lagging economic indicator because it follows the trend of the economy at a much slower/snail like pace and it won't improve for quite some time. but, we're all being duped right now, because many of us are taking pay cuts while the cost of living is skyrocketing. Oil, gas, electricity, and even food is becoming more and more expensive during a time when a lot are making less than they were before. and believe me, even when the economy recovers and all indicators point towards positive trends, your bosses still won't raise your pay to what it was before. what will this lead to? more consumer debt, and more poverty and consequently more crime.

This is all b.s. to get people shopping just in time for the holiday season. I think major retailers are the next to collapse, most are over-leveraged and have a very high cost of inventory because they can't sell their goods fast or cheap enough thanks to one stop retailers like Walmart. if this holiday season doesn't do well in sales, look for even more retailers to close up shop.

we may be recovering, but it will be temporary because nothing has been done to ensure that this will not happen again. capping executive compensation has nothing to do with the issue. banks, real estate, insurance, and investment companies need to have an entire regulatory body that will create laws, audit their books, and protect the people from fraud. but nothing like this will ever be done because these are the businesses that hold the money, every politician has been bought off by them, they contribute to campaigns on both sides of the isle, and no one we elect will ever stand up for whats right and push for this kind of policy.

Notice the ones who cry for a "free market" and less gov't regulation are either the same crooks who took our money to bail them out of a mess they started, or the same fools who let them have it after we allowed them to run wild with barely any regulation. A "free" non-regulated market is for people who believe in "miracles" instead of the occurrence of improbable events, and think that every single person in this world is honest and follows a utilitarian philosophy, and for the people who created the idea and want you to believe that.

[toldyouso21]

To all those who gleefully and paradoxically wish or hope the country is still in recession: YOUR ATTITUDE, WILL DETERMINE YOUR ALTITUDE. adjust it--or...you may get more than you bargain for in a true Depression.
(like lose every single thing you own--all it takes is a life changing catastrophe, retirement or not, secure job or not, money in the bank, or not).

There are at least half of us in this country who yearn for the dire, just because that half is angry about losing an election and wants things to be worse than when Bush was in charge--that is pretty sad, but in the end, cutting off one's nose to spite one's face will make for a sorry answer to anger.

[toldyouso21]

"From a technical perspective, the recession is very likely over," said Federal Reserve Chairman Ben Bernanke.

"A recession that showed no signs of ending last January appears to be firmly entering the recovery phase," said Christina Romer, the chair of the White House Council of Economic Advisers.
*******************************************

REAL LIFE has absolutely nothing to do with "technicalities". For instance, "technically" a global economy is a good thing--in reality, it means an equalizing of the game board--which means either the world all has a lifestyle and means and money similar to the most advantaged group (americans) OR that one group's lifestyle and pay and homes and existence is lowered to mirror everyone elses and therefore make the game board more competetive.

Those Americans for global economies are fools., even if their gambit is not actual jobs but marketing or capitalizing from the stock market--because the end result, (rich or not) will be the rest of the country looking and being like a 3rd world backwater--and even if such places are nice to visit--no one in their right mind would want to live in the horror of such grasping, slums--but those who prey on their own country in pursuit of a global economy assure no less than America becoming similar to Brazil.

[payback108]

Just wait round two is coming after the first of the year.

[owlgal]

How can they say the recession is over? Not only have tons of jobs been lost, many, many industries have cut salaries, benefits and matching 401 contributions, saying "gee be glad you have a job", setting the general public back even further as all the "bills" continue to rise along with the gouging by the banks as they scramble to get as many fee increases in before the new laws take effect. Happy Holidays as the inudstries that were "bailed out" laugh at government and continue on business as usual at the taxpayer's expense.

[Questionews]

We should all be grateful that Obama has kept unemployment under 8% like Obama said he would. He's a man of his word!!

[Jimmy_The_Kid]

So big business lays millions of people off and makes a killing, and the recession is over. Right.