Saturday, September 25, 2010

Recession Over? - Yes and No

The National Bureau of Economic Research announced Monday (September 20, 2010) that the recession, which had begun in December 2007, was over in June 2009. The 18-month recession was the longest economic downturn since the Great Depression. The announcement has been met with great skepticism since the economic recovery has been very unbalanced. Here's how I see the breakout:

Recession is over
  • Businesses - If a business has survived, the recession is likely over. During the recession, businesses have been eliminating marginal work and aggressively reducing costs. Many surviving businesses are earning record profits despite the recession.

  • Recession hasn't ended
  • Unemployed - Businesses are not hiring yet. Many companies are holding onto record amounts of cash since confidence in the economy is still low.

  • Homeowners - While housing values are no longer in free fall, they haven't recovered to pre-recession levels.

  • Retirees - Many investments accounts are still significantly below the values of late 2007. Interest rates on fixed income investments are extremely low. Some people are working longer or returning to work.

  • State and local governments - With high unemployment and significantly lower property values, tax receipts are lower and still going lower. Many of the tax levies in our area will likely fail.
  • The economic recovery seems to have been mainly in the area of business so far. As the recovery expands dimensionally, more will view the recession as truly over.

    For more on Reflections and Musings, check back every Saturday for a new segment.

    This is not financial or economic advice. Please consult a professional advisor.

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