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Editorial: Despite latest figures, recession's grip lingers

Saturday, October 31, 2009

(Updated 3:00 am)

If the Great Recession is over, you could have fooled the thousands of Triad residents still looking for jobs or worried about losing the one they have.

The justification for the official optimism, albeit guarded, was a Commerce Department report that, after a record four straight losing quarters, the U.S. economy grew at an annual 3.5 percent rate in the third quarter.

But the good news was tempered by the stark reality of a rebound fueled primarily by government stimulus money, a weak dollar and consumer-friendly programs like the highly successful Cash for Clunkers.

The millions of people who are still struggling to meet ballooning mortgages or were turned down for bank loans have been bypassed. The recovery light for them is still somewhere at the end of a distant tunnel.

For now, weak consumer spending continues to drag down the economy. Equally troubling in the Triad, manufacturing remains in the doldrums, although some companies have boosted profits by cutting jobs and out-sourcing work overseas.

On the jobs front, Guilford and surrounding counties have been plagued by unemployment rates hovering near 11 percent. Nationwide, the number of jobs has fallen for 21 consecutive months with little relief in sight.

While the costly federal stimulus package has added some work and sparked limited economic growth, those dollars are fast running out. Unless Congress acts promptly, the gains may be short-lived.

For starters, it can authorize tax credits for companies as an incentive to create new jobs. Also worth considering is renewing or even expanding the tax credits for first-time homebuyers, set to expire Nov. 30.

And the Federal Reserve could provide a welcome boost by pressuring bailed-out banks to make more consumer loans as a way of stimulating holiday retail sales projected again this year to be sub-par.

As President Barack Obama acknowledged after hearing the "good news" Thursday, "We have a long way to go to fully restore our economy."

That may prove to be an understatement. A reviving stock market and beefed-up foreign exports mean little to Americans struggling to pay the light bill.

Without jobs, it may be a while before their confidence returns, government proclamations notwithstanding.

What do you think?

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Andrew Brod

October 31, 2009 - 12:23 pm EDT

On the contrary, "beefed-up foreign exports" are quite important to an economy like North Carolina's, which does a lot of exporting. More exports means more jobs, and that means greater ability to pay the light bill. The stock market, on the other hand, has always been a noisy (i.e. imprecise) indicator of how the economy as a whole is doing.

Having said that, there has always been a vigorous debate about the business cycle. The non-government National Bureau of Economic Research doesn't go by GDP and instead follows a series of monthly indicators, including employment, personal income, and industrial activity. The stock market is not one of those indicators. The weights assigned by the NBER to the various indicators are subjective. The decision to date the beginning of the recession in December 2007 appears to have been based mostly on employment data, which started turning down at that point.

In recent recessions, it's taken longer and longer for employment to return to its pre-recession level. It took 39 months after the 2001 recession for national employment to get back up to the level of March 2001. In North Carolina it took 49 months. This recession has a very good shot at breaking that record. Perhaps because of that, the NBER will adjust its definition of the end of a recession.

In any case, economic indicators can only tell part of the story. If people feel economically insecure, then it's hard to argue that they're wrong even if some of the data look encouraging. What we've found in the past is that people tend to feel okay when things are getting better, even if they're not great. Here at the end of the longest recession since the Great Depression, things are getting better only slowly.

Badgolfer1

October 31, 2009 - 10:00 pm EDT

"The economy depends about as much on economists as the weather does on weather forecasters." is a pertinent quote made by Jean Paul Kaufman.

Sawdust

October 31, 2009 - 4:36 pm EDT

Don't look for any significant improvement any time soon of Obozo gets his health care or Cap and Trade passed, both are job killers. Looks like the fool is doing everything he can to make sure that the economy remains stagnant until he gets over half the voters on the dole, making them permanent Democrats.