Is the Great Recession Over? Will the 2nd Great Recession Start in 2011?

The Wall Street Journal reported this week that the National Bureau of Economic Research (NBER) has officially announced that the recession was over in June 2009 (more than a year ago).  This is the group that attempts to accurately determine when recessions begin and end.  According to The Wall Street Journal, NBER also stated that “the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity.”  So, is the Great Recession really over?  If it is, why is unemployment so high and the economy so weak?  When will we really recover?  What can we expect in 2011?  Will there be a double-dip?  Or, will the Second Great Recession start in 2011?  Let’s talk more about it now …

If the National Bureau of Economic Research pegs the Great Recession over in June 2009, I think most economists would agree the recession is over.  That said, what can be said of the economy today.

Certainly, the recovery has been very weak.  Unemployment is still high at 9.6% with about 42% of the unemployed unable to get a job for 27 or more weeks.  This represents very high, long-term unemployment.  The U-6 metric of unemployment that includes additional categories of unemployed workers (such as discouraged workers and those who want full-time work but settle for part-time employment) is almost 17%.  Just think one in seven Americans can’t find a full-time job.  That’s abysmal.

Another important point to consider.  In one study by the Economic Science Institute at Chapman University, the researchers found that  a recovery in housing expenditures precedes a recovery in the overall economy.  According to the researchers in their Wall Street Journal article, residential construction recovery has led every other recovery in the American economy for the last 14 downturns since the Great Depression.  In fact, the average recovery in new residential construction in more recent years from an economic downturn has been over 25%.  In the last 12 months, it’s only been 6.3%.  This is an indicator that we can’t expect an overall recovery in the American economy anytime soon. 

If jobs and housing are any indication (and they clearly are), we are in a very weak recovery.

So, is the Great Recession over?  Yes, from an economics point of view, it is over.  But, from a practical point of view, there are almost 15  million Americans out of work and residential housing is weak.

Why is unemployment so high and the economy so weak?  This goes back to our government not following pro-growth fiscal and monetary policies.  If you want to learn more about fixing our economy, you can read my new book Choosing the Good Life.

What can we expect in 2011?  In my opinion, higher unemployment, increasing inflation, and declining GDP, unless fiscal and monetary policies change significantly.

Will there be a double-dip?  No, if GDP does decline enough, it will be the start of another recession.

Will the Second Great Recession start in 2011?  Unless we pursue pro-growth policies, I think there is a reasonable chance we will slide into another or Second Great Recession.

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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