- Last Updated on Wednesday, 03 March 2010 05:00
- Published on Wednesday, 03 March 2010 05:00
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Are we there yet? Anyone who has ever taken a child, or for that matter even some adults on a car ride appreciates the grating nature of that question.
The answer is usually “no” which is then followed, in intervals as short as 30 seconds, by a repeat of the previous question. The more tolerant among us, and they are relatively few, either respond by gently saying “no not yet,” or probably more like my Dad did in the 1960s, with “be quiet (sometimes it was a simple, “shut-up”) and “I’ll tell you when we get there.” Given that it was offered in his best World War II Petty Officer’s command voice it usually ended the whining.
But it’s a question, in an entirely different context that economists and certainly the president and the Congress get asked all the time. Is this recession, now almost two years old, over yet? Unfortunately, unlike my dad, there is no one around who can say “…just be patient, and I will tell you when it’s over.” That luxury, in economics and politics, just doesn’t exist.
The good news is that there is strong evidence, the kind we economists appreciate, to indicate that the recession, by classic definitional terms, is on its last legs.
The Gross Domestic Product, after more than a year of contracting, is expanding. That’s the normal indicator that an economic downturn is just about over. It indicates that spending, consumption, and production, are all edging up. However, this recession is different from those in the past and the GDP numbers haven’t immediately translated into visible signs, through other indicators, like unemployment and home sales, that things are getting better. But I would add, that they do at least seem to indicate, that perhaps that we have turned a corner. And yes, I know Herbert Hoover said exactly the same thing in 1930. But, in my defense, he didn’t have any good GDP numbers to back him up, so let’s not take that comparison too far.
What’s really driving the anxiety on the part of the American people is the lack of jobs. The unemployment numbers slipped just a little earlier this year, but they’re still at a 30-year high, and a lot of people, in a range of industries, are out of work. While the national average is just below 10 percent, there are large pockets of severe unemployment, and the number of discouraged job seekers, not counted in the commonly reported data, belies a much more serious problem.
Unemployment, as anyone will tell you, is frightening, and its impacts, unless you’re incredibly lucky, grow exponentially. The same on a larger national scale is just as true. When someone loses their job, the first things that go, are spending on luxuries, nights out, but they are quickly followed by scrimping on the necessities.Even with COBRA, which many unemployed people can’t afford, health insurance dries up. The risk of personal catastrophe grows. And unless there is a second income, a temporary job, or some under the table work, bills don’t get paid. This eventually translates into foreclosures, personal disaster, and on that larger scale I mentioned, when this is happening to millions, serious national problems.
When the recession began, most housing foreclosures were on the high risk mortgages. These are the ones that shouldn’t have been written in the first place. However, during the past few months, with the system having absorbed those earlier half baked loans foreclosures based on more fundamental reasons, like the loss of a job, have gone up. More often than not these are frugal, thrifty, and responsible home owners and their only problem is that they can’t find a job. And while the big macro economic numbers look promising, in average everyday America many of us are still waiting for things to turn around.
At the same time, other anxieties are just in the background. Not only will there be another wave of home foreclosures, but what about an unsettling trend we’re seeing in commercial real estate foreclosures. But what this means to a recovery is still murky.
What has to happen is something that economists have never been able to adequately predict. Business people, entrepreneurs, the national mood, and our sense of optimism about our economic future have to change. What triggers that is still something of a mystery.
Is it more available credit, is it a sustained boost in sales, or is it just a feeling? In a million places, in hundreds of towns and cities, businesses have to get the notion that there are new contracts to bid on, folks wanting this or that service, and for the more adventurous, an epiphany that the time has come to borrow from everyone they ever met, max their credit cards, and launch that new service or product no has thought of. However, save for a few daring souls, that hasn’t happened yet. The confidence just isn’t there. But, maybe, if we become convinced that the economy really is expanding, that expenditures and consumption might be rebounding, this will start to change.
For me, that time, just like it must have been for my Dad when we went on trips back in the ’60s, can’t come any time too soon.