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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If you are asking people, you should expect answers meaningful to them, which most likely is when jobs recover, and probably not just when they start recovering, but when they are recovering enough to create more jobs than workforce growth (which has been when job growth exceeds 150k a month). Asking questions about which they don’t know and don’t care is stupid.
How about never.
Of course, I’m talking about a real recovery, not just the stock market up and the Wall Street criminals again getting obscene bonuses.
I expect that without real investment becoming the only way to make money, a middle class that is mostly successfully educated and a major downsizing of American’s entitlement compex, there will be an inexorable slide over the next 25 years to about the level of Greece.
Once the wheeze turns into a productive cough, then you’re recovering. Once the productive cough is gone, you’re recovered and you can expect to have the sniffles shortly.
I love it when pollsters ask random people about the “economy”. I agree with most of the responses so far, and as I can see, they amount to this:
Members of the general public barely know what is meant by “the economy”. This is probably because for any individual, her unemployment rate is either 100% or 0%. And her hopes or fears for her future economic well-being are given largely by the news media to which she chooses to listen.
At least this poll asked when the economy would “START” to recover.
Other polls or anecdotal comments I run into ask, or rather “proclaim” that the economy WILL RECOVER in “X” years or something.
But recover to what level? Another bubble?
We have been in a hugely inflated bubble for several years, is that the standard to which we measure recovery?
If there was an agreed upon metric for defining a “normal” functioning economy we could possibly answer the question with a bit more accuracy. But people have been led to believe the last several years were “normal”, what if where we are NOW is what “normal” should be?
If you go out clubbing for a few days in a row and staying high the entire time and then eventually fall asleep and wake up, what is “normal”? Do you think to yourself, “gee I wonder how long until I can get back to that Club and get high again?”, or is your life “back to normal”?
For some people, living at a nightclub and being high all the time is “normal” I guess, but for the rest of the population…no.
“Members of the general public barely know what is meant by “the economy”. This is probably because for any individual, her unemployment rate is either 100% or 0%….”
I think you are on to something. Maybe it would be better to limit the survey responses to people whose income depends directly on customer traffic and tips such as restaurants, hairdressers, taxi drivers etc. Its probably a concurrent or lagging indicator though.
Are there any variable income jobs that could be leading indicators ?
How amazingly different would the results have been if the options were something like this:
Less than 1 month
2-3 months
4-6 months
6-9 months
9-12 months
One year or more
No opinion
Do you really think 85% of respondants would have chosen the extreme as they did when asked as they did in the actual survey? Doubtful. If you lead them, they will follow…
Rightly observed, negative answers were not allowed which excludes people like me who’d think things will get A LOT worse.
Also a majority of people in interviews tend not to deviate too much from what they believe is an accepted worldview.