There’s some debate about whether the economy has begun to recover. The consensus among professional forecasters is that the trough occurred sometime in the second half of 2009. But it doesn’t feel that way — which is why the latest Gallup survey is so interesting. Gallup researchers asked regular people how long until they expect the recovery to begin, and nearly half think we are three years or longer away.
It’s clear people are pessimistic about the economy. Very pessimistic. (I should quibble that the question is sort of leading; while any response was allowed, negative numbers don’t seem like a natural response.)
But I think there’s something else at play here. There’s a disjunction between how economists use words like “recession” and “recovery,” versus how the general public understand these terms. According to the NBER approach, “A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.” So the recession has ended and the recovery has begun, but only because things got as bad as they are going to get. The “recovery” that we are in will take us from this low point, through some hard times, and hopefully, eventually, to a brighter place.
By contrast, I suspect that when non-specialists talk about a “recovery,” they are looking for the economy to return to some level of good health — perhaps to “recover” all those lost jobs that have disappeared over recent years. This definitely didn’t occur in the middle of last year, and by this definition, the Gallup respondents may well be too optimistic. It is extremely unlikely that the economy will recover the nearly nine million lost jobs for years to come. Indeed, it’s probably going to take a lot longer than five years before the unemployment rate falls below 4 percent again.
The public, it seems, is interested in the level of the business cycle, and the unemployment rate is a useful metric for this discussion. Yet the language that professional economists use is much more about changes in the state of the cycle. This is why economists talk a lot more about changes in things — growth in non-farm payrolls, or GDP. And right now it’s even more confusing, because commentators have been focused on the diminishing rate at which the economy is shedding jobs. That is, the wonks right now are talking about a rate of change of a rate of change.
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How could Gallup not have offered “A recovery is already underway” as an option? Certainly there are folks — I’m not among them — who believe we’re already in recovery, and for Gallup not to have offered that possibility to those answering the question seems like bad polling.
I’ve had to literally sit people down and “draw them a picture” on this topic. Give someone a sine wave and mark the peak and trough “recession starts” and “recovery starts.” Then mark the inflection points (where the wave crosses the horizontal access) as “beginning of the end of the recession” and “beginning of the end of the recovery.” Then ask him or her to put themselves in the shoes of someone who hires and fires. When do you consider layoffs? When are you on a hiring binge? Most people get the “aha” look around that point.
you have also not discussed response as a function of class- the underclass by definition will not recover, and middle class recovery will only come about with economic infrastructure change, which congress seems unwilling to facilitate- the upper class is already sensing recovery (viz. stock spike and lack of regulation on capital)- so, since the majority of respondants are not upper class, this explains the conclusion that the respondants are likely “too optimistic”
Okay, let’s talk turkey.
The economy is basically psychological. Yes, there are necessities needed to survive, but if people only purchased, consumed and worked only to survive, our economy would be in the stone age.
The big-money institutions have shown themselves to be untrustworthy, the government is not worth of our faith and trust, and the dollar is barely worth the paper it’s printed on. The successful people are often cheats and theives and if you are rich, the law simply doesn’t apply to you.
So, what to do…what to do…? Well, it is up to the people and their “representatives” to craft decent laws and then enforce those law.
But don’t hold your breath.
” Then mark the inflection points (where the wave crosses the horizontal access) as “beginning of the end of the recession” and “beginning of the end of the recovery.”
I do not understand the use of the word ‘access’ here.
Eric, if you think the dollar is worth so little, I’ll be happy to take yours off your hands for 1/10 their face value in gold or whatever good you desire.
Recovery, to this non-economist, means things are getting better for me. Instead I’m paying more for food and fuel, items not included in the CPI, my pay is stable or falling over time or I’m losing my job, my health care…. The economy to the non-economist is not numbers or indicators but the harsh reality that the US economy seems to have reset itself to a lower level for individuals and the reset is on-going. I have more month left at the end of the money. The things I have to have cost more. My income is not rising, nor is it certain. That’s the difference between recovery to an economist and recovery to a consumer.
they left “never” out of the survey