On recessions and recoveries
The main street reaction to the NBER’s determination of a recovery starting in June 2009 has been – as expected – angry. Here are a few sample comments to my post on the recession’s end:
- Obviously we need to redefine "recession." Most people would either laugh or become enraged at the idea that the recession ended in 2009. The only the well to do have seen any recovery and for many ordinary people things are getting worse rather than better. This just gives economics a bad name and makes it seem ridiculous and biased toward the top when these kinds of things get reported in the media. In fact, it fuels public anger.
- Do these folks get paid by our tax $$? This sounds like a good place to help reduce the deficit. Just an obvious point to make. But, if the recession is over…how come interest rates are at zero? Until the rates go up, I think we all know the answer.
- The NBER is the equivalent of out-of-touch weathermen who forecasted yesterday’s weather while we shovel up their prediction of ten inches of "partly cloudy" today. Sorry they hold zero credibility with me.
Here’s the problem: the term ‘recession’ is meaningless in the real world. It always has been. When a recession ends or begins tells you nothing about the outlook for the economy. It tells you nothing about the jobs picture. The NBER is a dating committee – that’s it. They determine when an economy is contracting and when it is expanding – not when it is healthy or unhealthy. In the video below Lakshman Achuthan says much the same.
Notice that Achuthan gives a double dip 50-50 odds. By comparison, Nouriel Roubini is at 40% odds.
What business people want to know is when the economy is healthy and when it is unhealthy. They want to know whether they can safely staff up or whether they should batten down the hatches. The same goes for individuals who feel insulted by this kind of talk when the economy is still in a world of hurt.
An attentive reader, Jenny, noted:
I don’t think we need to redefine recession, personally, though the media has a responsibility to report the news with various qualifications. The NBER dates the *technical* beginnings and ends of recessions in the US, and that’s fine. That’s what they do. And they do that based on economic data, which, since mid-2009, has clearly indicated economic *improvement* — regardless of what most people think.
I don’t know what you do about this. The media bear a lot of responsibility for the misperception of what recession and recovery mean. They have made it seem that recession means unhealthy and recovery means healthy. This is far from the case. And the NBER was careful to parse its words, mindful of the likely reaction to their dating.
But people are particularly angry now during this technical recovery. Why? My take: the recovery is fake. Policy makers took extreme measures to ensure some sort of recovery took place in 2009. Most of these measures are perceived to have been biased toward the elites, the banks, special interests, etc. The average individual on main street has seen far less benefit (see my Bill Clinton interview post). Moreover, how sustainable the recovery is remains to be seen. I am sceptical as are many readers. The Consumer Metrics Institute post captures some of the data behind this.
Achuthan talks about economic recovery as similar to a patient in a recovery room, still in serious pain but no longer in the trauma ward. That kind of imagery makes sense to me and would make sense to most people who see a sluggish economy still shedding jobs.