According to the National Bureau of Economic Research (NBER), the recession ended in June of 2009, but they just got around to announcing it this week. But the headlines and articles that followed focused all too much on the fact that it doesn’t feel like we’re out of a recession. Cripe these people will never learn.
But first, a message from Jon Stewart about the recession being over. He does a great job summing up feelings, and also showing how boring economics is to the masses.
|The Daily Show With Jon Stewart||Mon – Thurs 11p / 10c|
|The Recession Is Over|
I think she was talking about Cambridge in the UK but whatever. The point is the recession is over and the world (or at least the media) expects a party. This is due to a gross misunderstanding of what a recession is. We’ve used “recession” to talk about our troubled economic times. I’m guilty of it, but it’s not the proper use of the term. A recession is only meant to measure the time in which the economy is in decline.
Let’s put it in terms you might understand better. If you’re IRA had a balance of $1 million and it declined down to $600k, there’s your recession. The fact that it went to $605k means that recession is over, but it hardly means you’re doing well. It means the darkest days are likely behind, and that you can start to recover. That’s why the word ‘recovery’ is much more appropriate.
Here’s another example. Imagine a recession is like cancer. You start developing cancer in late 2007 but don’t really notice the symptoms yet. Later in 2008 you go to the doctor and he tells you that you have cancer and it started developing in late 2007. This is exactly how our recession was initially defined. We were in it before we really knew it.
You go through treatment and the cancer starts to go away. But you stay on treatment until mid 2010. Then your doctor comes back and says it looks like the cancer is gone and has been so since June of 2009. You celebrate the fact that the cancer is gone, but do you assume that your life will be normal again soon? No. You’ve lost 75 lbs, your hair, energy, emotions, and your positive outlook on life. BUT, you can start to recover and get your life back.
To people that have been through cancer treatment, the recession is hardly a comparison, but the terminology is analogous and makes for a good teaching tool. The recession is over, and has been for a while. Celebrate and rejoice because we have made it through the toughest part and things look to be getting better. But we are hardly out of this. And like a cancer, it could come back.