Recovery IS Weak (You Are Not Crazy!)
The final revision of Q1 GDP is out and it improved marginally to 1.9 percent. Don't panic about that sub-2 percent growth, say the pundits. Just this week Ben Bernanke said that the slowdown in the US was only temporary. The supply disruptions caused by the Japanese earthquake, combined with "transitory" food and energy price increases will go away, and the second-half will see a pick-up. Feel better? Me neither.
The dirty truth that economists, politicians and CEOs are loathe to say is that this has been a slow growth recovery from the beginning and its unlikely to become a red-hot one any time soon. The reason? That recession through which we all suffered was really different than anything we have seen in a long time and was labeled the "Great Recession" for a reason.
Here's a simple illustration--these are the years when the US economy contracted since 1950 (souce: BEA)
- 1954: -0.6%
- 1958: -0.9%
- 1974: -0.6%
- 1975: -0.2%
- 1980: -0.3%
- 1982: -1.9%
- 1991: -0.2%
- 2009: -2.6%
In our heads, we knew that the Great Recession was different--the unwinding of two decades of too much spending, too much borrowing and not enough saving, catalyzed by an over-the-top financial sector crisis, was different than the tech bubble bursting in 2000. In "The Aftermath of Financial Crises", authors Carmen Reinhart and Ken Rogoff noted that rotten recoveries often follow these once-in-a-generation collapses:
An examination of the aftermath of severe financial crises shows deep and lasting effects on asset prices, output and employment. ... Even recessions sparked by financial crises do eventually end, albeit almost invariably accompanied by massive increases in government debt.But in our hearts, maybe we all wanted it to be different. "Look at the stock market--that's a leading indicator", said one friend of mine. But the stock market is not the economy and despite doubling from the crisis lows in March, 2009, a rising market has not eradicated the country's unemployment problem, the housing malaise or created much-needed optimism in consumers and businesses alike.
As my pals Steve Chiotakis of Marketplace Morning Report just said to me on the air, "All right, Jill Schlesinger. You're bumming me out. I mean, tell me some good news!"
Here's my response: "All right, it's a once-in-a-generation recession. Don't forget that. And you know, facts are that we're probably through this, and maybe you've hit your quota for your generation."
I should have also added Happy Friday!
