We say this is still a recession
Yesterday’s statement from the NBER Business Cycle Dating Committee seemed a bit odd.
The committee usually releases a statement when it has something substantial to say about the economy. But saying it was maintaining the status quo on its recession call and holding off on declaring the downturn over seemed strange.
But Jeff Frankel, Harvard economist and a committee member, sheds some light on the reasoning behind the statement.
“The press was bound to find out that there had been an in-person meeting (as it did), and so the confusion created by issuing the statement was probably less than the confusion that would have been created by remaining mysteriously silent,” Frankel writes on his blog.
So there you have it. The committee thought ahead about the repercussions of its meeting getting leaked and appeared to act in a transparent manner.
That hasn’t stopped Frankel, himself, as well as Robert Gordon of Northwestern University from stepping forward and claiming the recession is already over.
But what seems to be getting lost in translation is this debate doesn’t really impact investors. Sure, officially calling the recession’s end sounds good from a psychological standpoint, but it’s not likely to impact policy decisions.
“The NBER is attempting to identify peaks and troughs in the economic cycle for research purposes,” Jeffrey Miller, CEO of NewArc Investments, writes at A Dash of Insight. “The NBER has a research mission, not a policy mission.”
And amid all the haggling about the recession’s end, we came across a recent post from the Pragmatic Capitalist blogger who takes a, well, pragmatic approach to the debate.
“In my opinion, this is simply an absurd discussion and insulting to the millions who have lost jobs in the last 18 months,” Pragmatic Capitalist says.
More than eight million jobs have been lost since the recession began in December 2007, yet investors and economists are already “popping the champagne” over the 162,000 jobs the economy added last month, the blogger notes.
“Technically, perhaps we are out of a recession, but this still feels like a recession to many and that will persist until the unemployment rate declines substantially and wages begin to climb for the rest of us,” blog says.
So let’s keep in mind that as NY Times, Washington Post, BusinessWeek and Newsweek all tout the renewed strength of the economy, there are still millions of folks who are out of work, and millions more who are only working part time, not because they want to, but because that’s all they can find right now.
And what’s the one area of the economy that’s supposed to lead job growth? Oh that’s right, small businesses. In case you hadn’t noticed, they aren’t doing so hot these days. As Paul already reported, this morning’s report on small business optimism fell last month as small business owners reported little pick up in their sales or confidence. That helps explains their reluctance to hire.
Not exactly a recipe for success.
