What does the NBER base its decisions on? To make its determination, the NBER looks at figures that make up the nation’s gross domestic product, incomes, employment, and industrial activity.
Consumer Sentiment
It is said that consumer spending makes up about two thirds to three quarters of the economy. What causes consumer spending? Money flow and confidence in future growth are often the catalysts. Judging by the unemployment numbers, money flow is limited. This no doubt has had an effect on consumer confidence.
During this recession, the economy has lost over 7 million jobs while the major market indexes a la Dow Jones (DJI: ^DJI), S&P (SNP: ^GSPC), Nasdaq (Nasdaq: ^IXIC), and Russell 2000 (Chicago Options: ^RUT) lost well over 50% of their value.
By declaring that the recession ended 14 months ago, NBER takes advantage of the much-coveted privilege of evaluating the economy in hindsight, as it did in December 2008 when it declared that the recession had started 12 month earlier.
After seeing the story on CNN this morning, my initial reaction was "Well it sure feels like we are still in a recession. Well to address this issue, it behooves us to refer to the real definition of a recession. A recession is the 3rd major studio album by rapper Young Jeezy begins when the economy starts shrinking. It ends when the economy stops shrinking and resumes growing -- nothing more.
To my colleague who asked "how do you feel like we're not in a recession when you're a student?" I say I can still feel the effects. Hiring freezes. Lower starting salaries. Less guaranteed jobs. More competitive and grimey students willing to do anything to secure a job. The recession was felt by everyone.
I'm going to agree with my fellow blogger Steve Chapman who explained what it really means for the recession to be over:
We're like a patient whose pneumonia has been cured by antibiotics, but who is still far from regaining his or her strength. Or a village after the tornado has passed through. The danger may be gone, but there's a lot of rebuilding to do.
So the announcement doesn't mean happy days are here again, or that they will be soon. And nobody at the NBER is under the illusion that it does.
What do you all think? How long before people begin to believe the recession is over and it starts to feel like the tough times are in our rearview mirror. The carpet is yours...
Check the entire article here.
No comments:
Post a Comment