The Recession is over (for a few economists).
While some folks are starting to say that the current recession might be over, this means squat in regard to when our economy will actually recover and start swinging again.
Economic forecasting, a shaky mishmash of science at best (as even the official chief economic forecaster himself, Ben Bernanke, has acknowledged), typically only takes into account GDP growth and traditional job loss data. These folks are not addressing long-term labor market trends or the real-world implications of long months of unemployment on families.
By saying that the recession is almost over, these economists are simply saying that on a couple of graphs, the sky has stopped falling. It does not mean it’s time to party.
Far from it as in fact, it’s pretty clear that we are experiencing the longest recession officially since the Great Depression. Our GDP perhaps isn’t contracting as much but as the former Federal Reserve Chairman Alan Greenspan predicts, national unemployment is likely to keep rising above 10% and stay there for a good while. And then there’s the actual recovery process. Hint: it’s going to take a very very very long time.
To give you an idea of how far we’ve got to go, just consider how large our gap is between the number of prime-age workers and the number of jobs our economy needs to create to make up for job losses since the start of the recession. As the Economic Policy Institute (EPI) points out:
To return to the pre-recession unemployment rate and fully fill in the gap in the labor market by September 2011, employment would have to increase by an average of 573,000 jobs every month for the next two years straight.
The likelihood of that happening? I have absolutely no economic forecasting creds or a crystal ball but that seems pretty nil.
But that’s just talking about one textbook aspect of economic recovery—getting our unemployment rate down. What about the real-life, long-term impacts of a recession on working families in the coming generation?
A new dismal but excellent brief from EPI, “Economic Scarring, the long-term impacts of the recession”, looks at this questions and finds, among many things that:
Economic recessions are often portrayed as short-term events. However, as a substantial body of economic literature shows, the consequences of high unemployment, falling incomes, and reduced economic activity can have lasting consequences.
For example, job loss and falling incomes can force families to delay or forgo a college education for their children. Frozen credit markets and depressed consumer spending can stop the creation of otherwise vibrant small businesses. Larger companies may delay or reduce spending on R&D.
In each of these cases, an economic recession can lead to “scarring”—that is, long-lasting damage to individuals’ economic situations and the economy more broadly.”
All this is to say—we are stuck in the woods for a good long time and there’s no use on putting on blinders to the lasting consequences of this recession. And even worse, it’s misleading to the public to do so and short-sighted as we’ve got some work to do to craft policy solutions to help families in the years to come.