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What We Talk About When We Talk About Recessions

1:14 PM MDT | September 17, 2009 | By VINCENT VALK

The recession is "very likely over," according to U.S. Fed Chairman Ben Bernanke. Pop open some champagne, pile into the Gulfstream, and head to your new condo in Miami!

OK, maybe not so fast. The Great Recession (the naming of which begs the question – is recession soon to become a dirty word like 'depression' has been since the, well, 'great' one? And, if so, what will replace it?) is almost certainly not going to give way to particularly great recovery. Odds are, you already knew that – and if it's true, then what, exactly, are we celebrating? Put another way, if a recession ends but nobody hires anyone or spends any money, has it really ended?

Technically, of course, it has. The textbook definition of 'recession' is two consecutive quarters of negative economic growth. Now, we've lately had a whole lot more than two consecutive quarters with negative growth, but the point is, sooner or later GDP will start growing again, and then any given recession will be over. That's all well and good. But unemployment is likely to remain high for some time, and banks are still being very stingy about lending. We haven't really gained much aside from, maybe, a reasonable expectation that all economic production will not soon grind to a halt.

"Recession" and "recovery" are both, in the end, just words. What matters are jobs, and credit, and production. If your business is still struggling to turn a profit in 2010, you are still going to face some tough decisions. You may have to make painful cuts. You will still face an uncertain future. You will still be operating in a world with shifting end-market demand, weak credit markets and a massive trend of deleveraging by both consumers and businesses. In many ways, it will still feel like a recession.    

The last – relatively mild – recession was followed by a 'jobless recovery' that lasted years. Today, the U.S. median household income, adjusted for inflation, is lower than it was ten years ago. If it is lower still in 2019, have we truly experienced growth? I'm not sure we have.

Nobody, least of all Chairman Bernanke, is predicting a quick and painless rebound from this thing. The recession is probably over. That's a good thing. But it's sort of like surviving a car wreck to face months of grueling physical therapy. Something tells me that the hard part lies ahead.














 
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