When arguably the two biggest in-the-tank-for-Obama media institutions finally feel compelled to cautiously begin using the term “double dip recession,” you can be pretty sure we have been comfortably ensconced in the middle of one for some time.
The U.S. has entered a second recession. It may not be as bad as the first. Economists say that the Great Recession began in December 2007 and lasted until July 2009. That may be the way that the economy was seen through the eyes of experts, but many Americans do not believe that the 2008-2009 downturn ever ended. A Gallup poll released in April found that 29 percent of those queried thought the economy was in a “depression” and 26 percent said that the original recession had persisted into 2011.
It is any wonder that many Americans believe that the economic downturn is still in progress? Home prices have fallen to 2002 levels. Values have dropped nearly 50 percent in parts of Florida, California, Nevada and Arizona. Property values are also down that much in parts of troubled big cities like Detroit. Estimates are that as many as 11 million homes have underwater mortgages. Banks have inventories of as many as 2 million foreclosed homes which have not even been released to the market. Home prices could fall another 10 percent if current trends persist.
Perhaps the most powerful argument that the recession never ended or that a new one has begun is the persistence of unemployment. Fourteen million people are out of work. A third of those have been jobless for more than a year. May employment data showed the jobless rate rose unexpectedly and that the economy added only 58,000 jobs. Experts believe that the unemployment rate will not improve significantly until the monthly gain in jobs is consistently 300,000 jobs or more. And, at that rate the gains would have to go one for more than two years to bring the economy back to what is traditionally considered a reasonable unemployment figure.
Until recently, most observers believed the American economy was in a slow recovery, albeit one with very disappointing job growth. The official figures on gross domestic product showed the United States economy grew to a record size in the final three months of 2010, having erased the loss of 4.1 percent in G.D.P. from top to bottom.
Then last week the government announced its annual revision to the numbers for the last several years. New government surveys indicated Americans had spent less than previously estimated in 2009 and 2010 on a wide range of things, including food, clothing and computers. Tax returns showed Americans even cut back on gambling. The recession now appears to have been deeper — a top-to-bottom fall of 5.1 percent — and the recovery even less impressive. The economy is still smaller than it was in 2007.
… There is, of course, no assurance that a new recession has begun or will do so soon, and a positive jobs report on Friday morning could revive some optimism. But concerns have grown that the essential problems that led to the 2007-09 recession were not solved, just as inflation remained high throughout the 1980 downturn. Housing prices have not recovered, and millions of Americans owe more in mortgage debt than their homes are worth. Extremely low interest rates helped to push up corporate profits, but companies have hired relatively few people.
In any other cycle, the recent spate of poor economic news would have resulted in politicians vying with one another to propose programs to revive growth. President Obama has called for more spending on infrastructure, but there appears to be little chance Congress will take any action. The focus in Washington is now on deciding where to reduce spending, not increase it.
And here’s one last depressing item. The Atlantic’s Derek Thompson blogged what he called “The 4 Scariest Economic Graphs I’ve Seen This Year“. The charts, first published at Calculated Risk blog, plotted 40 years worth of real GDP, real personal income (less transfer payments), industrial production, and employment. The charts use pre-recession levels as a baseline. So when there is a recession, all these parameters will plummet below pre-recession norms. But during recovery, these parameters will rise, until they reach 100% (the pre-recession level) and we can say that we have recovered the losses incurred during the recession. Here is Thompson’s chart for unemployment:
No bother reprinting the other charts; they all look the same. Not only are we in a double dip recession, we never had a true recovery, with only our GDP surpassing 95% of pre-recession levels. Two and a half years into The Great Recession, employment, real income, and production all remain mired below 95% of their previous levels.
I’m still scratching my head wondering, is this the Hope or the Change?