Are We Still in a Recession?

“I don’t know that I believe the recession is over.” I’ve been hearing that a lot lately. Over the past two years I’ve typically started my presentations by asking the audience to raise their hand if they believe the recession has ended. Typically, 10 to 20 percent of the audience raises their hand. This past month, I’ve given two presentations. Both times, no one raised their hand and some people laughed at the question.
The recession officially ended in June 2009 according to the National Bureau of Economic Research—the official arbiter of recessions. By their measures, the recession has ended: gross domestic product is growing, industrial production is increasing and income is expanding.  Employment is rising, although at a very slow rate and the unemployment rate is slowly coming down.
Why don’t most people believe the recession is over? Anecdotal evidence. They see people still struggling to find work or taking jobs below their previous salary levels. Managers are still finding large applicant pools for job openings and applicants are accepting lower salaries than they did a few years ago. Some of last year’s graduates are still looking for jobs.
Some of the labor force statistics confirm the anecdotes. The unemployment rate has come down, but so has the participation rate. In other words, people are still dropping out of the workforce because they can’t find jobs. It remains hard to find a job—the average length of unemployment was 37.1 weeks in February 2011 compared to 29.8 weeks a year ago.
The continued slide in home prices in many areas in the country is another sign that leads observers to say the economy is still in recession. On top of that, are the budget shortfalls at the federal, state, and local levels of government.
Below these very visible signs of continued weakness, however, is an economy that is building momentum. The 91 percent of the workforce that is working is spending. With the continued increase in spending, inventories have dropped.  As businesses are replenishing those inventories, they are purchasing more from manufacturers who are increasing their production and eventually hiring more people. Those newly employed people are spending more which means the momentum will continue to build as the recovery unfolds.
Despite the building momentum in the economy, global events, such as the unrest in the Middle East and the volatility of oil prices breathe more uncertainty into the perception of those not-raised hands.