My latest Marketplace commentary returns to a topic I touched on earlier this week: the fact that when economists talk about a “recovery” being underway they are talking about something completely different than when Joe Public says he’s waiting for the “recovery” to begin.
In putting the piece together, I found a nice quote from Christina Romer. Romer is an interesting player, both because she chairs Obama’s Council of Economic Advisors, and because she was previously a member of the NBER’s Business Cycle Dating Committee, the semi-official arbiter of when recessions end and recoveries begin. So she combines economic savvy with a need to also connect with the general public. I thought she gave the perfect answer a few weeks back on “Meet the Press,” when asked whether the recession had ended:
You know, there’s the official definition, and that talks about just when do you turn the corner, when do you go from plummeting to, to finally starting to go back up? And I think we have, at least in terms of GDP, reached that point. But I think the president’s always said, and what I firmly believe, you’re not recovered until all those people that want to work are back to work.
Her distinction, between a “recovery” (which we may well be in), and the economy having “recovered,” is an important one. These two terms have become too easily confused in the current policy debate. Inflation and deficit hawks have argued for less expansionary policy because a recovery may be underway. I’m not sure I grant the premise — I’m yet to be entirely persuaded that the recovery has begun. If it has, it is certainly somewhat faltering. More importantly, policy should be focused not on whether a “recovery” has begun, but on whether the economy either has “recovered,” or is expected to do so in a timely fashion. On this score, it’s clear: we are years and years away from an economy that has recovered from the Great Recession.
You can listen to my full commentary here.
and 
. You can also watch it on 
“Business Cycle Dating Committee” – wow, I expected this to be something completely different. (Entrepreneurs. Bicycles. Small Talk. Cocktails.)
I agree. There does have to be a balance, and you can’t go too far in over spending to get out, but contentment with non negative GDP is insufficient for sustainable growth. Considering the cyclical effects of extra spending, even when only considering the SR, The Net effect of spending is probably fairly limited, when considering the lower transfer payments and increased tax take with job creation. I would imagine that Spending on teacher development(Attempting to Increase base human capital for the generations that will pay for the baby boomers), as well as the Health care plan would be good starts.
A recovery is when your neighbor gets his job back. We’ve recovered when I get mine back.
Why does GDP matter? Our population is rapidly increasing. Even in GDP increases, GDP per capita can still be decreasing.
I’ve been emphasizing the job issue in writing and speaking since 2001. Starting from the 30′s virtually every recession has been shallower and taken longer to recover if you measure it by percent of peak employment lost and time to recover peak employment. The ’91 recession took 24 months to recover a 1.5% job loss. The 2000 recession took 36 months to recover a 2% job loss. We’re looking at a 5%+ job loss now and I expect it will take 48 to 60 months from the peak of December 2007 to regain those jobs. By me, that’s recovered. Thus, we still have two to three years to go. The only bright spot is that firms have cut so deeply that jobs might be part of the bullwhip phenomenon. As orders flow in firms may find that they have a capacity problem in their labor force.
“Great Recession?” I think not. It’s been a MODERATED DEPRESSION. I’m sure you get the difference. Prices never fell this time around. The high cost of goods and services will continue to bankrupt even the employed. Jobs? Where from?And when? There’s a dark presence out there and it’s just waiting for the moment of maximum impact to conclusively crash the world financially. You’ll see.
Those preaching more spending should perhaps take a look at some of these:
http://www.youtube.com/watch?v=00ECLxK2YTs
http://www.youtube.com/watch?v=cJqM2tFOxLQ&NR=1
http://www.youtube.com/watch?v=Mj0JAfq4esk
They happen to be questions by the same guy who I do not endorse or oppose, I don’t know enough about him to do either but I think that the questions he asked in those instances were on the money and the responses say all there is to say about the issue of spending your way out of debt.
For the record, I’m not an American but a European, and as a European I am concerned with America’s wellbeing as it’s a mutual thing and I am appalled whenever I see the USA making the same mistakes the EU makes.
Six months ago there were more than twenty nearby neighbors out of work or underemployed.
Today there are six.
It’s only anecdotal evidence, but things sure feel better here.