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July 27, 2009

Newsweek: The Recession is Over

This guy has been writing the same article for several weeks. This is the longest, latest version.

The Great Recession, which rolled over our financial lives like one of P.J. Keating's giant pavers, is most likely over. Home sales, while still far below the levels of a year ago, have risen for three straight months—a first since 2004. The stock market has rallied 44 percent since March, thanks to renewed optimism and improving earnings from big companies like Goldman Sachs and Apple. In June, seven of the 10 indicators in the Conference Board Leading Economic Index pointed upward, including manufacturing hours worked and unemployment claims. Macroeconomic Advisers, the St. Louis–based consulting firm, says the economy is expanding at a 2.5 percent annual rate in the current quarter. Economic activity "will increase slightly over the remainder of 2009," Federal Reserve chairman Ben Bernanke told Congress.

Smooth sailing for Obama? Not quite, even if you buy all that.

Catastrophe may have been averted. But when economists proclaim a recession over, they're celebrating a technicality: they mean economic output has stopped contracting. And while that is good news, you might wait a while before adding Judy Garland's rendition of "Happy Days Are Here Again" to your iPod. GDP growth alone can't feed a family, or pay a mortgage. Cursed with a high national debt load and blessed with a dynamic, growing workforce, the U.S. economy needs annual growth of at least 1.5 percent just to feel like we're standing still.

Worse, the data point that means the most to our psychological well-being—unemployment—is likely to keep climbing. The loss of 6.5 million jobs since December 2007 has spurred the sharpest rise in the unemployment rate since the 1930s. As manufacturing jobs move overseas and companies struggle to further reduce costs, unemployment—which stands at 9.5 percent—is likely to rise above 10 percent. "There's a difference between having an expansion and an economy that has recovered," says Lawrence Summers, Obama's chief economic adviser.

Having survived a near-death economic experience, Americans now need to focus on surviving what's likely to be a pokey, painful recovery. "I see 1 percent growth in the economy in the next few years," says New York University economist Nouriel Roubini. "It's going to feel like a recession, even when it ends."

He then starts hailing Obama's New Deal 2.0.

Bush, if you remember, had several years of terrific GDP growth and, eventually, a fairly low unemployment rate. The media focused relentlessly on the unemployment figure when GDP grew rapidly; and then, when the unemployment rate fell, they began focusing on "discouraged workers" who do not show up in the unemployment rate. In other words, even when the unemployment rate fell to good levels, the media simply discarded the statistic as unreliable and asserted anew that unemployment was quite high.

They didn't focus on the actual figure again until it began creeping up, just a bit, near the end of Bush's term.

Anyone think the media will play the end of Obama's recession (if it is the end) similarly? Or will we now be assured that a jobless recovery is just super-duper?

Political flacks and the media (BIRM) will tell us this is the best we can expect, and that we should praise Obama for accomplishing even this small thing. He inherited a recession, after all.

Oddly enough, the media did not praise Bush for overseeing a strong recovery despite inheriting a recession from Clinton and then, just eight months later, seeing the country through a calamitous attack on the United States which caused fears of a global depression.


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posted by Ace at 04:49 PM

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